Market research company BMI has highlighted the market pressures that Japanese and other Western industry players are facing as a result of China’s dominance of rare earth supply, particularly through the shipment of yttrium.

The company says China’s latest selective tightening of rare earth exports has revealed the structural dependence of import-reliant countries such as Japan on Chinese supply chains. This is particularly notable given that the deadline for the current rare earth trade truce is approaching.

“China’s second wave of rare earth export controls was initially suspended until November, while President Xi Jinping’s September 23 to 25 State visit to the US concluded with a two-month trade truce extension to January 10, 2027.

“However, the scope and durability of this de-escalation remain uncertain, particularly as Bejing has yet to publish an official notice extending the November deadline for rare earths,” BMI highlights.

Overall, rare earth shipments from China to Japan fell by 14.8% year-on-year over the first nine months of this year, with exports in September alone posting an 8.4% year-on-year decrease.

“The most acute constraint has emerged in yttrium, a critical input used as a thermal barrier coating on turbine blades to prevent high-temperature degradation and as a protective coating and insulator in semiconductor applications.

“In stark contrast to the broader rare earth basket, China’s yttrium shipments to Japan have effectively collapsed,” BMI adds.

The company also notes that China’s outbound rare earth shipments have remained volatile this year, with overall rare earth exports having declined by 9.6% year-on-year to 43 700 t from January to September, even as shipments in September alone increased by 6.7% year-on-year.

BMI expects Japan’s efforts to secure reliable non-Chinese rare earth supply to accelerate further with stronger cooperation with its Western partners, particularly the US, as a way of bolstering joint efforts to compete effectively with China on strategic mineral supply chains.

US CRITICAL MINERAL STOCKPILING

BMI highlights that the strategic stockpiling of critical minerals will play a greater role within the US mineral-security framework in 2027, offering a more immediate means of mitigating supply disruptions relative to other longer-term supply-security measures.

Further, the company says the recent use of export controls on critical minerals has highlighted the need for a mechanism capable of buffering manufacturers against sudden restrictions on foreign supply.

“Strategic inventories can provide access to material during such disruptions, buying time for alternative supply channels and longer-term domestic capacity to develop,” BMI adds.

The company also highlights that the Project Vault programme is beginning to take shape as an operational critical mineral reserve, adding another layer to US critical mineral security initiatives.

Announced in February, BMI explains that this programme aims to build strategic inventories of critical minerals for US manufacturers to draw on during periods of supply disruption, combining up to $10-billion in US Export-Import Bank financing and close to $2-billion in private capital.

The build-out of the reserve has gained momentum in September, with diversified miner Glencore and multinational commodity trading company Mercuria joining US public-private partnership VaultCo with combined commitments of $1-billion, bringing global sourcing and logistics capabilities to this initiative.

As the US remains reliant on overseas sources for many critical minerals, building strategic inventories will still require reliable access to supply from its resource-rich partners, indicating that stockpiling complements rather than replaces efforts to diversify international supply chains, BMI concludes.