There’s been a lot of discussion about threats to rare earth supply chains.
You’d be forgiven for thinking this is an overblown topic that’s perhaps captured too much airtime in the media.
So, is this real?
Are manufacturers actually under threat from Chinese export bans of rare earths?
As far as I can tell, cracks are beginning to emerge where supply is having a real impact on industry.
Take this article from the US as an example:
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According to the piece, Ford’s CEO said a shortage of rare earth minerals temporarily caused the automaker to shut down some of its plants last month.
Stating: “We have had to shut down factories. It’s hand-to-mouth right now.”
You can read the full piece here.
Mining Memo’s Take
Right now, conditions are ripe for rare earth stocks to move higher.
But let’s step back for a moment to understand why this market has changed from desperately negative to highly bullish in 2025.
Two years ago, the pivot away from renewables drove investors out of critical metal stocks, which included rare earth stocks.
But another major problem for this sector was Tesla’s announcement that it would remove rare earth metals from its next-generation vehicles.
The market viewed this as a big deal regarding the outlook for REEs.
Specifically, the Neodymium and Praseodymium (NdPr) metals in the rare earth package… these are the key elements used in permanent magnets for electric vehicles.
Investors panicked and sold off rare earth stocks, sending these companies to new all-time lows.
So, why was Tesla doing this?
Well, obviously, it could see supply chain vulnerabilities on the horizon.
However, it was also looking to reduce costs by up to 50% while scaling its global vehicle sales from 1.3 million to 20 million vehicles by 2030.
This is what I wrote in 2023, in the wake of the rare earth sell-off:
“NdPr magnets are the superior choice when it comes to EV production.
They offer significant performance benefits, enabling the development of compact, torque- and power-dense electric motors.
According to some experts, replacing rare earth magnets from its next-generation fleet will inevitably compromise efficiency.
There’s a fine line between cost and performance in electric vehicle design.
But Tesla appears to be shifting dramatically toward cost savings, slashing production expenditures to deliver low-cost EVs for the mass market.”
With fears that other EV makers would follow the same path, rare earth stocks entered a deep bear market in 2023 and 2024.
But as you know, sentiment has since flipped in 2025… China has kicked off rare earth export bans against the West.
Meaning rare earth stocks are hot again in the eyes of investors!
But is the underlying threat to REE stocks still there?
Crisis creates innovation.
And that’s perhaps one reason why China hasn’t fully deployed its rare earth trump card: a complete export ban to the West.
Doing so might cause innovation and a new technology that displaces the need for rare earths.
For example, some experts suggest NdPr magnets could be replaced with ferrite magnets, which mainly use iron oxide with barium and strontium additives.
In fact, some car manufacturers are already using the technology with mixed success.
The advantage is that iron oxide is incredibly abundant and cheap compared to Rare Earths.
However, that comes with a loss in efficiency.
According to Adamas Intelligence, the extra ‘weight penalty’ of ferrite magnets translates into shorter distances between each charge.
Historically, that’s been one of the main sticking points for EV uptake over conventional cars.
Especially here in Australia, with long distances between recharge stations.
Rare earth magnets provided the breakthrough that lifted EVs into the same league as conventional cars…
Where the recharge distances could match the refilling distance of a gasoline vehicle.
But for now, there is no commercial-scale alternative to rare-earth magnets—or at least one that can match them in terms of performance.
So, what does that mean?
For investors, rare earth stocks are the opportunity.
A key strategy (or portfolio hedge) to play ongoing tension between China and the US.
Until next time.
Regards,
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James Cooper,
Editor, Mining: Phase One and Diggers and Drillers
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