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NEW YORK, May 5, 2026 /CNW/ -- China's most effective weapon in the rare earth war wasn't a missile, a tariff, or a trade embargo. It was a price tag. For more than two decades, Beijing has used a remarkably simple strategy to maintain its stranglehold on the global rare earth supply chain: whenever a Western company would get serious about building an independent processing capability, China would act to crash prices. And the result is generally the same: the investment case falls apart, the funding disappears and the company folds. China's monopoly survives another cycle.  Companies mentioned in today's commentary includes:  Realloys Inc. (ALOY), MP Materials Corp (NYSE: MP), Compass Minerals International Inc. (NYSE: CMP), Nouveau Monde Graphite Inc. (NYSE: NMG), USA Rare Earth Inc. (NASDAQ: USAR), NioCorp Developments Ltd. (NASDAQ: NB).

REalloys (ALOY), a North American rare earth processor with an operational facility in Ohio and a processing partnership in Saskatchewan, may be the first company positioned to break that pattern…and the reasons why have very little to do with the market and everything to do with how the rules have changed. But to understand why REalloys is poised to break this pattern, you first have to understand the strategy that killed all the others.

How China Won the Rare Earth War Without Firing a Shot

The West handed its rare earth processing capability to China roughly 40 years ago. The last major U.S. rare earth mine, Mountain Pass in California, closed in 2002, unable to compete with Chinese production costs. By 2010, China controlled approximately 90-95% of global rare earth production and an even larger share of the processing and refining that turns raw material into usable metals and magnets. But dominance alone wasn't enough. China seemingly sought to make sure no one else could challenge that dominance. How they pulled it off was surprisingly simple: a pricing benchmark called the Asian Metal Index, or AMI.

The AMI is a wholly Chinese-owned and controlled pricing index. For years, it served as the global benchmark for rare earth pricing. And because China controlled both the supply and the index, Beijing had the ability to set prices at whatever level served its strategic interests.

According to experts who have spent years studying China's rare earth strategy, the pattern worked like this: whenever Beijing saw a Western rare earth supply chain or processing capability being developed, it would manipulate the AMI and flood the global market with cheap material. Prices would crash, the investment case for the Western project would evaporate, and the company behind it would either scale back or shut down entirely.

It happened in the early 2000s. It happened again in 2010-2011. And it happened once more in 2015-2016. Every time the West showed signs of building something that might reduce its dependence on Chinese rare earths, the same cycle played out: prices crashed, capital fled, and China's monopoly tightened.

The Crisis That Should Have Changed Everything

The most dramatic chapter of this story came in 2010, when a territorial dispute between China and Japan over the Senkaku Islands triggered what many consider the first open weaponization of rare earth supply.

In September 2010, China unofficially halted rare earth shipments to Japan. Within months, rare earth prices spiked dramatically, with the prices of some oxides increasing more than tenfold. The price of dysprosium oxide alone surged from roughly $90 per kilogram in early 2009 to over $2,300 per kilogram by mid-2011.

What followed was a gold rush. Western investors poured billions into rare earth projects across Canada, the United States, and Australia. Mountain Pass reopened. For a brief moment, it genuinely looked like the West was going to break free from China's grip.

Then China did what it usually does. After the initial panic subsided and prices peaked, China eased its restrictions and flooded the market with supply. Prices collapsed just as quickly as they had risen. Dysprosium oxide, which had peaked above $2,300, fell back below $200 per kilogram by 2016. One by one, the Western projects that had launched during the boom ran out of money, ran out of investors, or simply couldn't compete. Molycorp, the company behind the Mountain Pass revival, filed for bankruptcy in 2015.

The Trap That No Western Company Could Escape

China's strategy worked for one simple reason: every Western rare earth company lived or died by market pricing. And China controlled the market. Their investment cases were built on commercial economics: if rare earth prices stayed high enough, the projects would be profitable. If prices dropped, they wouldn't be.

China understood this perfectly. No Western competitor's economics ever worked for long because Beijing could reset the price wherever it wanted. It was an elegant trap. The higher prices went, the more Western investment poured in. And the more Western investment poured in, the more likely China would eventually crash prices to wipe it out.

And even the companies that somehow survived the price crashes faced a deeper problem: they were still quietly dependent on Chinese technology and equipment for almost everything they needed to operate. As one rare earth processing expert put it: 1% reliance on China is 100% reliance on China. Some companies bought Chinese processing equipment and couldn't keep it functioning, because China sold them the hardware but retained the knowledge necessary to service it.

Why This Time Is Different

Three things have changed since the last cycle that make REalloys' (ALOY) position fundamentally different from every Western rare earth company that came before it.

The first is policy. On January 1, 2027, updated U.S. defense procurement rules under DFARS take effect that will effectively ban Chinese-origin rare earth materials from American weapons systems. That means the demand for domestically sourced, defense-compliant rare earth metals and magnets is no longer dependent on market pricing. It's mandated by law.

The second is government backing. The U.S. Export-Import Bank has issued REalloys a $200 million letter of intent to support its supply chain development. And the Japan Organization for Metals and Energy Security (JOGMEC) has signed an MOU covering technology transfer and potential financing. That kind of backing is not expected to be price-dependent. These are institutional commitments from organizations that understand the strategic imperative and are in it for the long term.

The third, and perhaps most important, is that REalloys has built something that doesn't depend on Chinese technology at any point in the chain. Through its partnership with the Saskatchewan Research Council (SRC), the company has developed a processing pathway that was designed from the ground up without Chinese technology, equipment, or critical consumables. When China blocked the export of processing technology in 2020, SRC built its own systems from scratch…and ended up producing higher-purity metals with greater efficiency using an AI-driven process that runs with six people instead of the 80 a comparable Chinese facility would require.

The Supply Chain China Can't Kill

REalloys has assembled an end-to-end supply chain that covers every stage from raw feedstock to finished magnet. Upstream, it owns the Hoidas Lake rare earth project in Saskatchewan and has secured feedstock agreements with partners in Kazakhstan, Brazil, and Greenland. Midstream, it holds an exclusive 80% offtake on production from SRC's Rare Earth Processing Facility in Saskatoon, targeting first commercial production in late 2026 to early 2027. Downstream, it operates a metallization and magnet-manufacturing facility in Euclid, Ohio, which is a site with more than three decades of specialty metals experience and existing contracts with the U.S. Department of Defense, Department of Energy, and NASA.

That Euclid facility is currently the only one in North America with a proven track record of delivering heavy rare earth metals, alloys, and magnets to government and commercial partners.

By early 2027, the combined platform is expected to produce approximately 525 tonnes per year of neodymium-praseodymium metal, roughly 30 tonnes of dysprosium oxide, and 10 tonnes of terbium oxide, which would make it the largest source of heavy rare earth oxides outside China. Phase 2 plans call for significantly larger production later this decade, including approximately 200 tonnes per year of dysprosium metal, 45 tonnes of terbium metal, and capacity for up to 20,000 tonnes per year of heavy rare earth permanent magnets.

Other companies to keep an eye on:

MP Materials (MP) is the operational backbone of America's domestic rare earth recycling and production ecosystem. Its Mountain Pass facility is designed as a closed-loop, zero-discharge operation that recycles more than one billion liters of water per year, and the company is now building out dedicated recycling infrastructure to accept post-consumer electronics and post-industrial scrap as feedstock for new magnets.

In July 2025, MP formalized its $500 million partnership with Apple, which will significantly expand the Independence facility's magnet production lines and establish a first-of-its-kind commercial rare earth recycling line in California. This collaboration positions MP as the central node of a fully integrated domestic supply chain all within the United States.

Compass Minerals International (CMP) remains a leading provider of essential minerals, solidifying its position with consistent performance and strategic growth initiatives. Since the previously mentioned reference, the company has made significant advancements in its operations, product offerings, and sustainability efforts.

Compass Minerals has expanded its product portfolio by introducing new and innovative solutions. Notably, the company has developed a range of specialty salts for various industrial applications, including pharmaceuticals, food additives, and water treatment.

Nouveau Monde Graphite Inc. (NMG) is developing an integrated mine-to-anode model designed to supply low-carbon graphite to Western battery manufacturers. Its Matawinie project in Quebec is structured as an all-electric open-pit operation powered by hydroelectricity, significantly lowering lifecycle emissions relative to conventional peers.

Concentrate from Matawinie will feed the company's downstream facility in Bécancour, where purification, spheroidization, and coating processes will convert material into battery-grade anode graphite. Vertical integration enables higher margins while reducing exposure to Chinese processing dominance.

USA Rare Earth (USAR) is the first company to execute a fully vertically integrated "mine-to-magnet" strategy on U.S. soil. In early 2026, the company secured a transformative $1.6 billion funding package from the U.S. government, which included a direct equity stake from the administration. This capital is being deployed to accelerate the development of the Round Top Mountain project in Texas, the richest known deposit of heavy rare earths, gallium, and beryllium in the country.

The Stillwater plant is expected to reach commercial production in the first half of 2026, producing high-performance sintered neodymium-iron-boron (NdFeB) magnets used in F-35 fighter jets, electric vehicle motors, and missile guidance systems.

NioCorp Developments (NB) is the primary developer of the Elk Creek Project in southeast Nebraska, which is poised to become the most significant domestic source of Niobium, Scandium, and Titanium in North America. Following the launch of the White House and EXIM Bank's "Project Vault" initiative in February 2026, a strategic effort to build a U.S. Strategic Critical Minerals Reserve, NioCorp has moved into the national spotlight as a foundational security asset.

Operationally, the company has transitioned from exploration to active development, with its Board of Directors approving the official start of the Mine Portal Project in early 2026. This $44.6 million initiative marks the beginning of physical construction at the site, supported by recent drill results that confirmed high-grade mineralization.

By. Michael Kern

Oilprice Intelligence brings you the inside view on where the next gains will come from, breaking down the market's biggest growth driver with analysis from veteran oilmen and experts. Click here to get this crucial intel for free

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