China's Rare Earth Ban Spurs Western Diversification

One year after China’s Ministry of Commerce imposed export restrictions on seven rare‑earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium—and on magnets containing them, Western economies have accelerated efforts to reduce reliance on Chinese supplies. China controls about 60% of global mining, 91% of refined production and 94% of permanent‑magnet output, making the curbs a powerful economic tool.

The measures drove European prices for dysprosium and terbium up six‑fold and pushed international yttrium‑oxide prices from roughly $6‑8 per kilogram to $120‑270, a rise of over 4,000% in some markets. In response, the European Commission adopted the ReSourceEU action plan in December 2025, earmarking up to €3 billion over the next year for projects that aim to cut strategic dependence by 50% by 2029 and set targets for domestic extraction, processing and recycling by 2030. The United States announced a $12 billion strategic reserve to stabilise prices and support manufacturers. American firm USA Rare Earth also pledged more than €175 million to build rare‑earth processing capacity in France, with French government backing.

Despite a partial suspension of expanded controls agreed after a U.S.–China leader meeting, the original seven element restrictions remain fully in force, keeping exports roughly 50% below pre‑restriction levels. Analysts estimate that meaningful Western self‑sufficiency could take up to two decades, though the current crisis may finally drive serious diversification of the rare‑earth supply chain.