China’s Rare Earth Truce Nears Its November Expiration

Beijing has not remained passive during this lull. Since June, Chinese authorities have imposed specific export restrictions on ten American companies, including MP Materials and USA Rare Earth, followed by measures against fourteen European entities in July. These actions signal a shift toward surgical pressure rather than the broad, market-wide embargoes that previously rattled global automotive and defense sectors.

Strategic dominance remains the core of China’s leverage. According to the European Parliament, China controls 75 percent of global rare earth mining and 85 percent of processing capacity. For critical elements like terbium and dysprosium, this share exceeds 95 percent. This concentration forces Western economies into a difficult position, as European Central Bank data indicates that over 80 percent of large euro-area firms sit within three steps of a Chinese supplier. While the EU pushes for faster implementation of its Critical Raw Materials Act to foster domestic production and recycling, the lead time required to build alternative infrastructure leaves industries vulnerable to price volatility. Recent trends already reflect this anxiety, with European erbium prices climbing over 50 percent since June due to nervous stockpiling.

Whether Beijing allows the current suspension to expire or opts for another extension remains unclear. A total return to the broader, extraterritorial controls proposed in 2025 would likely accelerate Western efforts to decouple from Chinese supply chains. By utilizing narrower, targeted restrictions, China has demonstrated that it can influence Western industrial policy without triggering the full-scale search for alternatives that a total embargo would necessitate. For now, the mere threat of renewed restrictions serves as a potent tool for Beijing, keeping global markets on edge as the November deadline approaches.