GLOBAL ECONOMY

China's Quiet Weapon: Rare Earths and Battery Supply Chains as the Biggest Bottlenecks for Global Industry in 2026

In October 2025, China expanded its rare earth export controls to 12 categories and introduced a 0.1% extraterritorial application, with many of the related measures suspended until November 10, 2026. Japan experienced actual, un-suspended controls, leading to sharp 88% and 82% declines in its rare earth imports from China in March and April respectively, with dysprosium and terbium imports dropping to virtually zero since January. Rare earth prices have surged since the beginning of the year, forming a "dual-market" structure where supplies sourced outside China command a 4 to 6 times premium over domestic Chinese prices. While MP Materials and Lynas have established initial milestones for a non-China supply chain, they are still far from sufficient to replace China's refining market share (approximately 91%). The South Korean battery industry must build the framework for alternative supply chains within this year, caught between a double deadline: the expiration of China's suspension on November 10 and the expiration of the US FEOC graphite suspension at the end of the year.