Beijing uses terbium, dysprosium export curbs to push domestic firms up rare-earth value chain

China’s export controls on heavy rare earths are being used by domestic manufacturers as an industrial policy tool, not just a supply restriction. Financial Times reporting on July 9 said Chinese companies were treating limits on exports of key materials to Japan as a chance to move into higher-value magnet and component production. Fastmarkets reported the same day that Washington had responded with nearly $2.9 billion of funding commitments over five weeks to build supply chains outside China. ABC reported on July 8 that Australia was still trying to force China-linked investors to sell down stakes in Northern Minerals, a company developing dysprosium supply in Western Australia. ### Why do terbium and dysprosium matter so much? Terbium and dysprosium are heavy rare earths used in permanent magnets that must keep performance at high temperatures, making them important for electric vehicles, wind turbines and defense applications, according to ABC’s description of Northern Minerals’ Browns Range project and broader rare-earth reporting. ABC said Northern Minerals wants to become the first substantial producer of dysprosium outside China. (markets.ft.com) China’s leverage comes from processing as well as mining. Fastmarkets said Beijing still accounts for about 60% of rare-earth mining and around 90% of processing and separation, leaving buyers exposed even when ore is mined elsewhere. ### How is Beijing using export controls beyond simply choking supply? The Financial Times said on July 9 that Chinese manufacturers viewed the rare-earths ban as a “historic” opportunity to move up the value chain after exports of key materials to Japan were cut. (abc.net.au) That framing suggests the curbs are being used to steer more downstream manufacturing toward Chinese companies rather than only to limit shipments abroad. (fastmarkets.com) The mechanism is straightforward. If foreign magnet makers cannot reliably secure terbium or dysprosium, customers in autos, electronics or defense have a stronger incentive to source finished products from companies inside China that still have access to feedstock. That is an inference from the reported export restrictions and China’s processing dominance. ### Why is the U.S. response still incomplete? (markets.ft.com) Fastmarkets reported that between June 2 and June 26, 2026, the U.S. government committed close to $2.9 billion in direct federal funding through four channels to rebuild a rare-earth metals and permanent-magnet supply chain outside China. It said the combined value of the backed supply chain exceeded $4 billion. (markets.ft.com) Yet Financial Times reporting published July 8 said rare earths from Trump-backed U.S. mines were still being sold to Japan and South Korea rather than feeding a fully domestic chain. That leaves a gap between mine financing and a closed-loop U.S. system for separation, refining, alloying and magnet production. ### What does the Australia fight show about control of supply? ABC reported on July 8 that China-linked investors had not complied with Treasurer Jim Chalmers’s latest order to divest shares in Northern Minerals. (fastmarkets.com) An industry expert cited by ABC called the three-year struggle over control of the company “extraordinary.” ABC had reported on May 18 that Chalmers ordered another six companies to sell their holdings within two weeks, adding to earlier divestment orders. (markets.ft.com) Northern Minerals operates the Browns Range heavy rare-earths project in Western Australia’s east Kimberley. ### What comes next for Western supply chains? The next milestones are administrative and legal as much as industrial. (abc.net.au) ABC said Chalmers may have to go to federal court to enforce the divestment orders against the Northern Minerals investors. In the United States, the near-term benchmark is whether the June 2-June 26 funding burst produces domestic processing and magnet capacity rather than more mined material flowing to Japan and South Korea. (abc.net.au) Fastmarkets’ July 9 accounting of the funding wave and the Financial Times’ July 8 report on Asian sales will be the reference points investors and policymakers use to judge that next step. (fastmarkets.com) (abc.net.au)