China Targets Two US Rare Earth Producers with Export Controls
1h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
rare-earthsexport-controls
Fazen Markets Editorial Desk
Collective editorial team · methodology
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China announced on 22 June 2026 that it has imposed export controls on two US producers of rare earth elements. The move directly targets Washington's multi-year effort to build alternative supply chains for minerals critical to advanced manufacturing and national defense. The specific producers and the precise scope of the controls were not immediately detailed. The action reflects a further escalation in the technology and resources dimension of the US-China strategic rivalry.
The global rare earths market is heavily concentrated. China has accounted for over 90% of global processing and refining capacity for years, a dominance solidified after a 2010 maritime dispute with Japan triggered a temporary embargo. The current macro backdrop features sustained US tariffs on Chinese goods and aggressive federal subsidies through the 2022 Inflation Reduction Act, which incentivizes domestic and allied sourcing of critical materials. The catalyst for this specific action appears to be the maturation of several US-based rare earth separation and magnet manufacturing projects, funded by the Defense Department and Department of Energy, which began reaching commercial-scale production in early 2026. China's controls aim to constrain the growth of these non-Chinese supply chains at a pivotal moment.
China's share of global rare earth mining is approximately 60%, but its control over processing is significantly higher. The US imported $160 million worth of rare earth compounds from China in 2025, a figure that had declined from a 2022 peak of $220 million due to new domestic capacity. The two targeted US firms are estimated to control a combined 15-20% of nascent US separation capacity. A comparable precedent is China's August 2023 export restrictions on gallium and germanium, which caused spot prices for those metals to surge by over 30% within two months before stabilizing. The VanEck Rare Earth/Strategic Metals ETF (REMX) is down 4.7% year-to-date, underperforming the S&P 500's gain. MP Materials, a leading US rare earth producer not named in this action, saw its stock decline 8% in after-hours trading following the news.
| Metric | Before Announcement (Est.) | Immediate Market Reaction |
|---|---|---|
| MP Materials (MP) Stock | $18.50 | ~$17.02 (-8%) |
| REMX ETF | $65.20 | Not yet traded |
| NdPr Oxide Spot Price (China) | $57,500/tonne | Price assessments pending |
The price of neodymium-praseodymium (NdPr) oxide, crucial for permanent magnets, has been volatile, trading between $50,000 and $75,000 per tonne over the past 18 months.
The most direct impact will be felt by US and allied defense contractors, including Lockheed Martin (LMT) and Raytheon Technologies (RTX), and electric vehicle makers like Tesla (TSLA) and General Motors (GM), which depend on rare earth magnets for motors. These firms face potential cost increases and supply delays for magnet inputs, pressuring margins. Clear beneficiaries are non-Chinese rare earth producers with established processing, such as Lynas Rare Earths (LYC) in Australia and potentially Vietnam's and India's developing sectors. A key risk is that China's action could be more surgical than initially feared, potentially exempting certain downstream products to avoid collateral damage to its own manufacturing exporters. Trading flow data suggests institutional investors are likely to increase long positions in Lynas and short-term tactical shorts in US defense primes, while options activity points to hedging in the Global X Autonomous & Electric Vehicles ETF (DRIV).
The first catalyst is the detailed list of controlled items and technologies, expected from China's Ministry of Commerce within two weeks. Second, the US Department of Energy's response, including potential releases from the National Defense Stockpile or accelerated grant approvals under the Defense Production Act, will be critical. Third, monitor the Q2 2026 earnings calls for MP Materials (late July) and Lynas Rare Earths (mid-August) for management commentary on market shifts. Key levels to watch include the $55,000/tonne support level for NdPr oxide; a sustained break above $70,000 would signal severe market tightness. The share price of MP Materials holding above its 200-day moving average, currently near $16.80, will indicate market confidence in its insulation from the controls.
Rare earth elements are a group of 17 metals essential for high-tech applications. Neodymium and praseodymium are vital for the powerful permanent magnets in electric vehicle motors, wind turbines, and precision-guided weapons. Samarium is used in other high-temperature magnets, while lanthanum and cerium are used in catalysts and polishing powders. Without them, modern consumer electronics, green energy technology, and advanced defense systems cannot be manufactured.
The impact on EV maker stock prices will depend on the duration and severity of supply constraints and their existing contracted supply arrangements. Companies with long-term offtake agreements from non-Chinese sources, like Tesla's past deal with Lynas, may see minimal direct impact. Firms more reliant on spot markets or Chinese magnet suppliers could face margin compression. The uncertainty itself may lead to near-term multiple contraction for the sector until supply chain clarity emerges.
Yes, to a degree. The US has been rebuilding its rare earth supply chain for over a decade. The Defense Department has funded separation and magnet manufacturing facilities at companies like MP Materials and Lynas. The 2022 Inflation Reduction Act provides tax credits tied to North American-sourced critical minerals. However, the US still lacks large-scale, heavy rare earth processing capacity for elements like dysprosium, leaving specific defense applications potentially vulnerable to future disruptions.
China's export controls are a calibrated strike against the viability of competing rare earth supply chains, raising costs for Western defense and green technology sectors.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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