Reasons for the Dramatic Rise in Magnet Raw Material Prices Recently
1. Supply Constraints and Policy-Driven Reductions
a. Production Quotas and Consolidation: China, the dominant player in rare earth production, has tightened control over its rare earth sector. In 2025, the country reduced the growth rate of rare earth mining and smelting quotas to 5.88%, down from 12.5% in 2024. These quotas are now allocated exclusively to leading enterprises like Northern Rare Earth and China Rare Earth Group, accelerating the exit of smaller, inefficient producers. This consolidation has reduced market competition and enhanced the bargaining power of major suppliers, pushing prices upward.
b. Export Restrictions: China has imposed stricter export controls on medium and heavy rare earths, such as dysprosium and terbium, which are crucial for high-performance magnets. Since April 2025, the export of seven categories of these materials requires licenses, with approval processes taking up to 45 days. This has disrupted global supply chains, causing prices to spike. For instance, domestic prices for dysprosium oxide and terbium oxide have surged by 45% and 50%, respectively, since the start of the year.
c. Environmental and Geopolitical Disruptions: Environmental regulations in China have forced some rare earth smelters to suspend operations, reducing supply. Additionally, geopolitical tensions have disrupted imports from Myanmar, a significant supplier of rare earth ores to China. In the first five months of 2025, China's rare earth ore imports from Myanmar plummeted by 21.7%, exacerbating supply shortages.
2. Explosive Demand from Emerging Sectors
a. Electric Vehicles (EVs): The global shift towards electric mobility is driving unprecedented demand for rare earth magnets. Each EV requires approximately 3 kilograms of neodymium-iron-boron (NdFeB) magnets for its motor. With global EV sales projected to reach 10 million units in 2025, this translates to a demand for over 20,000 tons of NdFeB magnets, a 20% increase from the previous year.
b. Robotics and Automation: The advent of humanoid robots, such as Tesla's Optimus, is creating new demand for high-performance magnets. Each robot uses 2-4 kilograms of NdFeB magnets, and with mass production expected to commence, demand in this sector could soar to 23,600 tons by 2035, growing at a compound annual rate of 83.8%.
c. Renewable Energy: The expansion of wind power and energy-efficient elevators is also contributing to demand growth. For instance, the installation of 80 GW of new wind capacity in China in 2025 will require significant quantities of NdFeB magnets for direct-drive turbines.
3. Cost Pressures and International Price Disparities
a. Rising Raw Material Costs: The prices of key rare earth metals, such as praseodymium-neodymium, have surged by 13% since the start of 2025, reaching 565,000 yuan per ton. Similarly, terbium oxide prices have jumped by 28% to 8.97 million yuan per ton. These cost increases are being passed down the supply chain, pushing up magnet prices.
b. International Price Premiums: Overseas prices for rare earths are significantly higher than domestic ones due to supply constraints. For example, overseas dysprosium oxide prices are 44% higher than in China, while terbium prices are over 300% higher. This has increased costs for foreign manufacturers, forcing them to raise prices or seek alternative suppliers.
4. Geopolitical Tensions and Trade Policies
a. Trade Disputes: Escalating trade tensions between major economies have led to the imposition of tariffs and export restrictions on rare earths. China's export controls are seen as a response to U.S. tariffs, creating a bidirectional squeeze on global supply.
b. Strategic Stockpiling: Fears of supply disruptions have prompted some countries and companies to stockpile rare earths, further tightening market supply and driving up prices.
