China Keeps Rare Earth Exports to Japan at Zero, Extending Supply Constraints Beyond Market Expectations

• China shipped no gallium, dysprosium, terbium, or yttrium to Japan in June, extending the zero-export streak under controls linked to the diplomatic dispute over Japan's Taiwan comments.
• Full enforcement of China's rare earth export controls would put $6.5 trillion of annual downstream production outside China at risk, while stockpiling enough material would cost about $9.2 billion upfront and $900 million a year.
• NdPr oxide nearly doubled over seven months to about $125/kg in February 2026 as China's export controls tightened supply, before retreating while remaining above pre-control levels.
• China's refining share of magnet rare earths fell from 90% to 85% in a year, and planned refining projects outside China could reduce it to 70% to 73% by 2035.
• Chinese shipments of dysprosium, terbium, and yttrium to Japan returning to full volume next month would indicate the export restrictions reflect a bilateral dispute rather than a lasting supply constraint.

China's Export Controls Tighten Magnet Supply & Raise Costs for Ex-China Manufacturers

China shipped no gallium, dysprosium, terbium, or yttrium to Japan in June, extending the export freeze on key rare earth materials. Gallium exports returned to zero after a one-month increase in May, while yttrium shipments to both Japan and the US remained at zero for a second consecutive month.

Japan hosts the world's largest rare earth magnet industry outside China, making its manufacturers among the most exposed to China's export controls. The restrictions, introduced after a diplomatic dispute triggered by Japanese Prime Minister Sanae Takaichi's November 2025 comments on Taiwan, have shifted the market from higher prices to physical shortages for producers dependent on heavy rare earth inputs.

Trade Restrictions Disrupt Rare Earth Supply Chains & Increase Dependence on China's Processing Capacity

Beijing imposed export controls on seven heavy rare earths, including dysprosium and terbium, on April 4, 2025, reducing shipments and disrupting magnet supplies for automakers in the US and Europe. Some manufacturers cut production as permanent magnet shortages spread through the supply chain. China broadened the policy on October 9, 2025, by requiring foreign companies to obtain licenses for "internationally made" products containing Chinese-sourced rare earth components, even when traded outside China, before suspending those additional measures for one year in November 2025.

Japan remained subject to a separate set of export restrictions after China suspended its broader October 2025 measures. Beijing tightened controls on dual-use goods bound for Japan in January 2026 and expanded them twice more in February, targeting major conglomerates. China has also incorporated rare earth export controls into recent trade negotiations with US President Donald Trump.

Supply Diversification Reduces China's Market Share but Dependence Persists Through 2035

IEA Director Fatih Birol argued that paying more to diversify supply chains is the cost of reducing dependence on concentrated mineral production. Even with planned projects outside China, and outside Myanmar for mining, projected capacity would meet only about 50% of ex-China mining demand, 25% of refining demand, and less than 20% of magnet demand by 2035.

If MP Materials' and Lynas's $110/kg NdPr floor-price agreements reach full contracted production and all announced projects outside China are completed as planned, China's share of rare earth refining could decline from 85% to 73% by 2035, while mined rare earth output outside China and Myanmar could triple to 57 kt, reducing China's share of global mine supply below 50% for the first time in decades.

Government-Backed Pricing Favors Rare Earth Producers Over Downstream Manufacturers

Retail investors are more likely to gain exposure through smaller rare earth producers and magnet manufacturers than diversified miners. Rare earths contribute well under 1% of an EV's value and less than 0.1% of an internal combustion vehicle's value, limiting their effect on vehicle manufacturers' margins. Cost pressure instead falls on magnet and motor manufacturers, where rare earths account for about 40% of a NdFeB magnet's cost and roughly 5% of an EV motor's cost.

MP Materials' and Lynas Rare Earths' $110/kg NdPr floor-price agreements with the US Department of Defense demonstrate how government-backed offtake can secure minimum pricing. Smaller pre-revenue rare earth developers generally lack comparable agreements, leaving their revenues more exposed to swings in NdPr prices.

No public data identifies which magnet or motor manufacturers have floor-price agreements and which remain exposed to spot NdPr prices. As a result, June's export data cannot reliably predict the earnings impact for individual companies, making company selection more uncertain than broad exposure to the rare earth supply chain.

What to Watch Next: China's Customs Data and NdPr Spot Prices

NdPr oxide trades below its February 2026 peak near $125/kg but remains above pre-export control levels, while June customs data continue to show no heavy rare earth shipments to Japan. As long as those export restrictions persist, government-backed NdPr floor-price agreements near $110/kg favor producers with contracted offtake over buyers that remain exposed to spot prices.

A return to full-volume shipments of dysprosium, terbium, and yttrium to Japan in the next customs release, or confirmation that Beijing's November 2025 suspension of its October export controls remains in force without a Japan-specific carve-out, would indicate the restrictions were temporary rather than a lasting change in global supply. That would reduce the justification for the current premium on ex-China rare earth supply.

Two indicators will determine whether the trend is lasting: China's customs data, with July shipments due in mid-August, and NdPr spot prices tracked by Benchmark Mineral Intelligence and Fastmarkets. If heavy rare earth exports to Japan remain constrained and NdPr prices stay within the IEA's estimated support range of $85,000 to $110,000 per tonne, the evidence would point to a lasting security premium rather than a temporary price spike.