The saying "The Middle East has oil, and China has rare earths" is becoming a reality in 2026, driving significant market movements. Once, the United States monopolized global rare earth technology and production capacity, leaving China to sell resources cheaply and be constrained. Now, the tables have turned, with China using its resources, technology, and full industry chain to completely control the global rare earth discourse, achieving an epic reversal. In 2026, global rare earth prices surged, with both light and heavy rare earths seeing price increases, and A-share rare earth leaders doubling their profits. This ongoing rare earth rally is not short-term speculation but a long-term result of national strategic control, a tight global supply-demand balance, and a surge in high-end demand.

Many see only the price rise of rare earths and the strength of the non-ferrous metals sector, but fail to understand the underlying geopolitical game and industrial cards. What is the fundamental logic behind this round of rare earth price increases? Why can't the United States, despite owning rare earth mines, build a complete industry chain? How has China managed to control the lifeline of global high-end manufacturing and military industry? What are the core A-share rare earth leaders' positions, and how can ordinary investors seize industrial opportunities? This article provides a comprehensive, in-depth analysis of the rare earth industry's price increase logic, technological barriers, the China-US game, and A-share investment opportunities.

Rare Earth Price Hikes Boost Corporate Earnings

In the first half of 2026, the "industrial vitamin" rare earths staged a sharp price rally. For light rare earths, the average price of praseodymium neodymium oxide increased by 73.6% year-on-year, stabilizing in a historically high mid-range. Heavy rare earths saw an even stronger surge—dysprosium oxide rose about 15% in June alone, with the latest quote exceeding 2.1 million yuan per ton, while terbium oxide simultaneously surged to around 6.5 million yuan per ton. The rise in rare earth prices directly enhanced the operating income of companies in the industry chain. According to SMM statistics, among the 10 rare earth-related companies that have disclosed semi-annual reports, performance express reports, or performance forecasts, all achieved varying degrees of growth in the first half of the year. Leading company Northern Rare Earth is expected to see its first-half performance increase by 112.74% to 121.33% year-on-year, while Sinomine Resource Group expects a performance increase of 1078.07% to 1302.46% year-on-year.

Why Are Rare Earth Prices Rising?

Rare earths have been included in the national strategic mineral catalog, and the entire chain from mining and smelting to export is under continuous tightening control. The 2026 total rare earth mining quota is only 285,000 tons, including 246,000 tons of light rare earths and 39,000 tons of medium and heavy rare earths, with extremely limited growth for medium and heavy rare earths. Mining quotas are valid for the current year and cannot be carried over to the next, fundamentally eliminating hidden over-mining. Export controls are being continuously improved, with rare earth raw materials, smelting products, production equipment, and technology all included in the control scope, prioritizing the protection of the domestic high-end manufacturing chain. The rare earth industry is characterized by a "low volume, high price" pattern: from January to July 2026, China's total rare earth export volume was 34,706.3 tons, a 10% decrease year-on-year. While export volume declined, the average export price doubled year-on-year.

What Are Rare Earths?

Rare earths, often called the "vitamins of industry," are used in tiny amounts but can dramatically change material properties—they are like a magic touch. Chemically, they are a group of 17 elements, each with unique functions, essential for everything from smartphone chips to missiles and aircraft carriers. They are classified into light and heavy rare earths based on resource characteristics and application scenarios. Light rare earths, represented by praseodymium and neodymium, are crucial for making neodymium-iron-boron permanent magnets, the world's strongest magnets, which greatly enhance motor efficiency and power density. Without them, there would be no high-efficiency drive motors for new energy vehicles, no wind turbines, and no vibration motors or voice coil motors in phones. In short, without rare earth permanent magnets, there would be no modern consumer electronics industry or the new energy revolution. Heavy rare earths, represented by dysprosium and terbium, are vital for maintaining strong magnetism at extreme high temperatures, making them essential for military and high-end equipment. For instance, fighter jet engines, precision-guided missile servo motors, phased array radar, and stealth aircraft radar-absorbing coatings all depend on them. It is said that producing one F-35 fighter jet requires 0.4 tons of rare earths. It is no exaggeration to say that a country's control over rare earths, especially heavy rare earths, directly determines the level of its national defense modernization. The commonly mentioned rare earth permanent magnets, made with rare earth elements, are the strongest and most powerful permanent magnets known to humanity, called the "king of magnets." Ordinary magnets have weak magnetism and are prone to demagnetization, while rare earth permanent magnets are super magnets made by adding rare earth elements like neodymium, praseodymium, dysprosium, and terbium to iron, resulting in smaller size, stronger magnetism, and resistance to demagnetization. Over 90% of these are neodymium-iron-boron permanent magnets, with light rare earths as the main body and heavy rare earths as additives to prevent demagnetization at high temperatures. Permanent magnet materials are the most important and promising downstream application for rare earths, accounting for over 60% of rare earth functional materials. New energy vehicles and embodied robots are key demand drivers. New energy vehicles are the core base, with global production and sales expanding, continuously driving permanent magnet demand. Wind power and industrial robots are growing steadily, with the second half of the year being a peak season for production and sales, potentially triggering magnet material restocking. Humanoid robots represent a long-term incremental demand, with each unit requiring a significant amount of high-performance magnetic materials, opening a new demand curve if mass-produced. AI computing power is also driving new demand for heavy rare earths like dysprosium oxide in high-end MLCCs.

China's Three Trump Cards in Rare Earths

China's ability to strangle the world's rare earth supply relies on three key trump cards. The first is resource endowment. China controls 40% of global rare earth reserves, 70% of production, and 90% of processing capacity, with 77% of US rare earth imports coming from China. The Bayan Obo mine in the north is a base for light rare earths, while areas like Ganzhou in Jiangxi province have unique ion-adsorption rare earth mines, rich in medium and heavy rare earths critical for the military industry—a strategic treasure almost absent in US and Australian mines. China holds an absolute monopoly on global medium and heavy rare earth supply. The second card is separation technology. Mining is just the first step; the real expertise lies in smelting and separation. The 17 rare earth elements have extremely similar chemical properties, making their separation a high-tech barrier. Academician Xu Guangxian, the "father of rare earths in China," led the independent development of the cascade extraction process, which is globally leading in separation efficiency and cost. This process simplified complex rare earth production, allowing data to be input into a model to automatically calculate the best production parameters. In 1978, a national cascade extraction training class was established, teaching the entire theory, formulas, and design methods to technicians nationwide for free. This technology, considered a top secret abroad, became a "common process" mastered even by township enterprises, laying the foundation for the flourishing of the rare earth industry across China. By the early 1990s, China was exporting large quantities of high-purity individual rare earths, completely reshaping the global rare earth industry from selling "by the ton" to selling "by the gram." In fact, for a long time, US company MP Materials and Australian company Lynas Rare Earths could mine light rare earth ore but had to ship the concentrate to China for separation and purification. Reserves underground are not a monopoly; the real grip comes from production capacity and technology in hand. The third card is the complete industry chain. China has built a comprehensive system from upstream mining, midstream separation, to downstream new material manufacturing. It is the world's largest producer of rare earth permanent magnet materials, accounting for over 90% of global production. Currently, China holds two "absolute advantages" in the rare earth field: 69% of global rare earth smelting and separation capacity and over 90% of precision processing capacity. In producing rare earth permanent magnet materials required for military weapons, global output is 310,200 tons, with China's output at 284,200 tons, accounting for 91.62%. Approximately 90% of global rare earth refining, 93% of permanent magnet manufacturing, and 99% of heavy rare earth element processing are completed in China. How does China use rare earths to strangle the US? According to industry scenario simulations, if China completely cut off rare earth supply, F-35 production lines could stop within six months. Within 1.5 years, only 3 out of 10 planes might be able to fly, with critical components like guidance systems and control chips irreplaceable and unrepairable.

How Did America Lose Its "Rare Earth Leader" Status?

In the 1980s, the US produced 70%-90% of the world's rare earths, holding the top position with advanced separation technology. However, due to the high pollution and energy consumption of rare earth mining and smelting, combined with stricter environmental regulations and rising labor costs, the US chose to outsource this burdensome industry. At that time, China had abundant rare earth resources, and a large number of small and medium-sized rare earth enterprises emerged rapidly, competing by lowering prices, selling rare earths at "cabbage prices." This extensive mining came at a heavy environmental and health cost, making China the world's largest rare earth producer while US, Japanese, and European production capacity shrank and closed. But at this point, China only had production scale, not industry pricing power. Around 2010, a turning point occurred. China took three key steps that turned rare earths into a "national-level industry." First, through industry consolidation, scattered small factories were integrated into six major rare earth groups, ending the vicious price war. Second, total output and export controls were implemented, including export taxes and restrictions on key processing technology outflows, stopping the disorderly outflow of resources. Third, relying on the innovation of academician Xu Guangxian's team, the cascade extraction theory was pioneered, modeling the complex process and achieving a breakthrough in rare earth separation technology, surpassing overseas levels. By 2010, after Japan was cut off from rare earth supply for nearly two months and prices soared, Western countries realized that China had already grasped the "lifeline" of rare earths. The US quickly restarted its only rare earth mine, Mountain Pass, but it lacked core refining technology—the rare earths mined in the US still had to be shipped to China for processing.

Why Can't Other Countries Build Their Own Rare Earth Industry Chains?

Countries are not unwilling to develop rare earth industries, but they simply cannot do it in the short term—building a complete industry chain from scratch takes at least 10 to 20 years. Rare earths have no insurmountable theoretical barriers, but there are extremely high practical barriers. First, the capital barrier is extremely high. A single rare earth separation plant requires over $1 billion in investment, and a complete supply chain needs billions, with long payback periods, discouraging capital. Second, the process barrier is difficult to replicate. Rare earth extraction relies on precise control of thousands of steps, with the core being accumulated practical know-how. As of 2023, China accounted for nearly half of global rare earth patents, with separation technology leading the rest of the world by 5 to 10 years. Third, there is a severe talent gap. The rare earth industry in Europe and the US has been in decline for thirty years, leading to a shortage of specialized professionals, and training a core technical team takes over a decade. Fourth, strict environmental policies pose a challenge. Rare earth smelting and separation have high environmental requirements, and overseas plant construction faces significant public resistance and approval difficulties. For example, although the US has restarted its only domestic rare earth mine, Mountain Pass, it still lacks refining capacity, skilled workers, and supporting systems. Some experts predict that the US achieving self-sufficiency in rare earth supply may not happen until 2040, making it impossible to fully replace China's industry chain in the short term.

Key Players in the A-Share Rare Earth Industry Chain

As the rare earth industry reform deepens, market concentration is increasing, and the oligopoly structure is becoming more defined. As a national strategic resource, rare earth mining and smelting are strictly quota-controlled, creating high industry barriers and strengthening the discourse power of existing leading companies. The core "twin stars" of the domestic rare earth industry are China Rare Earth Holdings and Northern Rare Earth. China Rare Earth Holdings focuses on medium and heavy rare earths, with its subsidiary China Rare Earth Nonferrous Metals specializing in mining. Northern Rare Earth concentrates on light rare earths, alongside companies like Xiamen Tungsten and Shenghe Resources. China Rare Earth Holdings itself has the qualifications and capacity to mine rare earth ore, while Northern Rare Earth does not directly mine but purchases rare earth concentrate from Baotou Steel, which is a significant difference. In terms of supply, both rare earth mining and smelting separation are strictly controlled by total quotas. This year's total mining cap is 285,000 tons, including 246,000 tons of light rare earths and 39,000 tons of medium and heavy rare earths. At the listed company level, Northern Rare Earth received 182,800 tons of smelting separation quotas, and China Rare Earth Holdings received 49,600 tons, firmly placing them in the industry's first tier. It is worth noting that the core rare earth leaders mentioned in this article, including Northern Rare Earth, China Rare Earth Holdings, China Rare Earth Nonferrous Metals, Xiamen Tungsten, and Shenghe Resources, are all constituent stocks of the Nonferrous Metals ETF Huabao (159876) underlying index, allowing investors to capture the rare earth sector's performance with one click. Behind every metal lies a unique set of supply-demand logic and investment stories. Why does copper affect the global computing power? Has gold's safe-haven logic changed? What supply-demand changes are lithium, tungsten, molybdenum, and tin facing? Stay tuned for the "Nonferrous Metals Stories" column, where future articles will break down these topics one by one. Note: The performance of the index's constituent stocks is for display only; individual stock descriptions are not investment advice and do not represent the holdings or trading strategies of any fund under the management company. The fund manager evaluates the risk level of this fund as R3-medium risk, suitable for investors with a balanced (C3) risk profile or above. Any information in this article (including but not limited to stocks, comments, forecasts, charts, indicators, theories, and any form of expression) is for reference only. Investors must be responsible for their own investment decisions. Any views, analysis, or forecasts in this article do not constitute investment advice to readers and are not liable for any direct or indirect losses arising from the use of this content. Fund investment carries risks. Past performance does not guarantee future results. The performance of other funds managed by the same manager does not guarantee the performance of this fund. Please invest carefully.