CHARTS: Rare earth export restrictions, price spikes and the risks of demand destruction

26-fold price increase in 31 months

From January 2009 through August 2011, the monthly average price of dysprosium (Dy) oxide (China FOB) increased 26-fold, from $91/kg to $2,377/kg.

This price spike is often attributed to China halting rare earth exports to Japan amidst a territorial dispute, but in reality the rally had started months prior and was accelerated by a multitude of different forces; namely, falling Chinese export quotas, rising Chinese export duties, China’s weaponization of rare earth exports, a clampdown on illegal production in the nation, and resultant speculation and panic buying by end users.

This year, with China imposing export restrictions on a suite of rare earth materials earlier this month, including Dy oxide and other Dy-containing products, such as NdFeB magnets, flows from China to global end users are currently being bogged down by bureaucracy as sellers in China apply for and await the receipt of export licenses for affected orders – a process expected to take upwards of 45 business days.

Over the long term, these restrictions will have lasting impacts on global rare earths trade through the galvanization of supply chain development efforts in the US, Europe and elsewhere. In the near term, however, global end users – mindful of the 2010/11 price spike – face major uncertainty with respect to supplies and prices.

For the most part, rare earth prices have responded negatively to the new export restrictions, despite a sustained reduction in supplies from Myanmar and the recent stoppage of concentrate exports to China by MP Materials. Interestingly, prices were also initially indifferent when China halted exports to Japan in September 2010, but three months later embarked on a historic upswing that remains unmatched to this day.

Below is a summary of key developments from January 2009 through August 2011 that led to Dy oxide’s meteoric price rise.

January 2009: $91/kg

As of January 2009, China’s rare earth export quotas (i.e., the amount it permitted for export) had fallen steadily since 2005, down 13% in four years, raising concerns among end users.

Over the same period, China re-introduced export duties on rare earths in 2006 and gradually ratcheted them up from 10% to as high as 25% for a strategic selection of products, including neodymium metal, as well as dysprosium and terbium carbonate and chloride.

August 2009: $114/kg

With export quotas down and duties up, China’s MIIT released a draft report in August 2009 that hinted Beijing would ban the export of five rare earth elements within the next five years.

The following month, the New York Times reported that China was planning to further reduce its export quotas in 2010.

The price of dysprosium jumped 26% versus January but went largely unchanged thereafter through the end of 2009.

January 2010: $129/kg

In January 2010, China raised export duties on Fe-Dy alloy, a key input for high performance NdFeB magnets, from 10% to 20%, lifting the price of Dy products, including Dy oxide, by a similar rate month over month.

At the same time, China slashed its first of two export quotas for the year, as foreshadowed by the New York Times, leading the price of Dy oxide to more than double by July as end users raced to secure material.

In July 2010, China announced a 72% reduction to its second export quota for the year, exacerbating concerns while propelling the price of Dy oxide 26% higher month-over-month.

Two months later, in September 2010, China temporarily banned rare earth exports to Japan amid a territorial dispute.

Nevertheless, the price of Dy oxide and many other rare earths increased just modestly between July and December 2010, but the fever was nearing a boil.

In December 2010, Reuters reported that China planned to reduce its export quota for the first half of 2011 by another 35%, fueling a January price jump and a historic upswing to follow.

January 2011: $343/kg

Following the Reuters report, the five-month-stagnant price jumped 18% in January, 19% in February, 28% in March, 31% in April and 17% in May to a record $799/kg – a historic rally that remains unmatched to this day.

August 2011: $2,377/kg

A month later, in June 2011, the price soared 80% to $1,440/kg as the Chinese government cracked down on illegal mining in the nation and by August 2011 prices topped $2,377/kg, a 26-fold increase in just 31 months.

For the next five months, the price began to deflate but held above $2,000/kg into January 2012.

In February 2012, the average price fell to $1,633/kg and by December 2012 was down to $748/kg.

The following three years (2013/14/15) saw the price drop by roughly 33% each year to a floor of around $180/kg in 2016.

Short lived spike, long lasting fallout

While the price spike was short lived, the fallout was profound and enduring. In the years that followed, a quiet revolution unfolded in the electric vehicle sector. Where REE-powered motors once reigned uncontested, their dominance eroded as some manufacturers adopted or pivoted to alternatives.

From a negligible share of less than 1% in 2010, EVs powered by REE-free motors surged to over 12% of global sales by late 2017.

Adamas Intelligence points to this as a textbook case of engineered demand destruction – a deliberate shift to alternatives born of caution, catalyzed by the trauma of the 2010/11 price surge.

Companies, burned by volatility and unwilling to remain at the mercy of China’s whims, sought refuge in innovation, re-engineering their futures to sidestep the rare earth chokehold.

By 2018, however, with prices low and volatility tempered, REE-powered motors quickly recaptured market share, with 97% of all EVs sold each year since 2017 using them.

In 2017, when REE-free motor adoption peaked, the EV industry was still a relatively small end-use category and thus the impact on overall demand was less substantial than it would be today.

Undoubtedly, China recognizes this and will play its hand carefully this time around.

April 2025: China announces new export controls

Fast forward to this month and China is at it again, unveiling export controls on select rare earth products. But this time, the playbook feels different – less blunt force, more scalpel.

Adamas sees a calculated precision in Beijing’s approach, an intent to wield its resource dominance with surgical intent.

The likely targets? Initially, industries like defense contractors and drone makers, sectors where REE scarcity could deliver maximum disruption to rivals, particularly in the West.

Meanwhile, China appears poised to spare others, like the EV industry, from the worst of the fallout – perhaps a nod to its own stake in the green revolution or a bid to keep global markets from spiraling into further chaos.

Unlike the reckless two-order-of-magnitude price surge of the early 2010s, this move suggests a China keen to inflict pain where it hurts most while dodging the collateral damage of a full-blown crisis.

The message is clear: China knows the power it holds and is learning to wield it with chilling finesse.

For the rest of the world, the echoes of 2010/11 still linger – a haunting reminder of vulnerability, a call to diversify, innovate, or risk being caught in the crosshairs of a prolonged resource war where the stakes only grow higher.