China has increased its use of rare earth elements. This decision is intended to be a negotiating card in the trade war with the US that is still playing out. The country has recently enacted export restrictions on several key materials. As a result, global market prices are highly volatile with prices skyrocketing for dysprosium and terbium, critical materials in high-performance magnets.
In May alone, the prices of dysprosium and terbium experienced stunning month-to-month jumps, quadrupling in price relative to April levels. This recent increase is a reflection of how the rare earth market has been drastically affected by market disruption caused by geopolitical vulnerability. These prices exploded to historic highs. Yet now, they have fallen from those heights, leaving industries that serve as a backbone to our economy relying on these materials in a perilous state.
China’s decision to impose new export restrictions on rare earths is occurring as tensions with the U.S. are escalating particularly over tariffs. These 17 rare earth elements are essential for our cell phones, renewable energy technologies, electric cars and an array of military capabilities. By controlling the supply of these materials, China aims to exert pressure on the U.S. and leverage its position in the global market.
The consequences of these price increases and export restrictions go beyond the short-term economic impacts. Industries that rely on dysprosium and terbium are already seeing a rise in production costs, as well as supply chain breaks coming to a neighborhood near you. Everyone from automakers to aerospace manufacturers are racing to lock in supplies. Undoubtedly, they will be looking to new funding sources and shifting their business models to make up for the effects of these changes.
Furthermore, experts suggest that the current situation may prompt other countries to seek greater independence from Chinese rare earth supplies. Countries such as the United States and Australia are increasingly taking the lead. They are doing everything to support building up their rare earth production capabilities as a counter move against China’s dominance in this sector.