The text below is an edited version of an article originally written by Piyush Goel. Read the full version here or speak to a CRU expert about market intelligence and analysis relevant to your organisation.
Rare earth prices outside China have risen sharply as Chinese export controls have tightened the availability of selected heavy rare earths and widened the gap between Chinese and ex-China markets. With China dominating rare earth separation capacity, the market is now at an inflection point, with the future of the price gap dependent on how quickly alternative supply chains develop.
Why are Chinese and ex-China rare earth prices diverging?
Chinese and ex-China rare earth prices are diverging because China's export controls have reduced the availability of selected heavy rare earths outside China, pushing ex-China prices higher.
In April 2025, China introduced export controls covering selected heavy rare earths, including dysprosium, terbium, yttrium and europium, as well as alloys containing these elements. Exports subsequently fell sharply, pushing prices outside China higher.
The scale of China's role in rare earth processing makes the impact of these restrictions significant. China accounts for 99% of global heavy rare earth separation capacity and 88% of global light rare earth separation capacity.
Against this dominant position, the sharp decline in exports of the affected materials has had a significant market impact- exports of dysprosium and terbium were 83% lower in January 2026 than in January 2025.
The result has been a growing divergence between Chinese benchmarks and prices in markets outside China. CRU data shows this most clearly for heavy rare earths, where EXW Rotterdam prices have risen sharply and now trade at a significant premium to Chinese benchmarks.
Yttrium illustrates the extent of the divergence: CRU forecasts EXW Rotterdam prices are expected to reach 78 times the Chinese price in 2026.
What could keep the gap between Chinese and ex-China rare earth prices in place?
Whether this premium becomes a structural feature of the rare earth market depends on three factors:
- How long export restrictions remain in place. If restrictions ease, trade flows could move back towards historical levels, supporting price convergence. If restrictions persist, ongoing supply concerns could support a sustained premium outside China.
- Whether ex-China midstream capacity develops. New mining capacity alone is not enough to create an independent supply chain. Processing and separation capacity outside China will be needed to establish a more integrated mine-to-magnet supply chain.
- Whether consumers are willing to pay a premium. Higher ex-China prices can only be sustained if OEMs and other consumers are prepared to pay more for rare earths and alloys sourced outside China.
Public and private investment in alternative supply chains has increased significantly, while governments, particularly the United States, and OEMs are also supporting the development of ex-China supply. However, the long-term effectiveness of these measures remains uncertain.
Will rare earth prices converge or diverge?
Rare earth prices could either converge towards historical levels or remain higher outside China, depending on how restrictions, ex-China supply chains and buyer willingness to pay evolve.
Convergence would see restrictions ease, ex-China supply chains stay weaker and consumers grow less willing to pay a premium, pulling prices back towards historical levels. Divergence would see restrictions persist, ex-China midstream capacity strengthen and buyers keep valuing diversified supply, keeping ex-China prices well above Chinese benchmarks.
Recent developments favour divergence. General licences have eased some pressure, but heavy rare earth exports remain limited and flows outside China are slow. Meanwhile, ex-China mine-to-magnet investment is accelerating: US producers are consolidating assets, governments are providing financial support, and OEMs are signing offtake agreements with ex-China producers.
The market's direction over the next 10–15 years will hinge on how these dynamics play out over the next two to three years. CRU forecasts the rare earth supply gap will reach almost a third of global demand by 2040, as energy transition and physical AI demand raise the strategic stakes for magnet rare earths.
The rare earths market is therefore at an inflection point. Whether today's price divergence becomes structural will depend on the durability of trade restrictions, the development of alternative supply chains and the willingness of consumers to pay for diversified supply.
Want to understand how these dynamics could shape rare earth supply, demand and prices? Explore CRU's Rare Earth Elements Special Report 2026 or speak to a CRU expert
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