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.
REalloys (NASDAQ: 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 message to the global market was clear: any company trying to build a rare earth supply chain outside China was operating on borrowed time. Beijing could pull the rug out whenever it wanted.
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.
So the West wasn’t just losing on price. It was losing on technology, process knowledge, and supply chain independence simultaneously. And every time a cycle ended, the West was further behind than it had been before.
Why This Time Is Different
Three things have changed since the last cycle that make REalloys’ (NASDAQ: 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. China can crash prices all it wants…it won’t change the fact that defense contractors need compliant material, and the only place to get it is from non-Chinese sources.
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.
That combination of policy-driven demand, institutional backing, and genuine technological independence means that China’s old playbook of crashing prices and waiting for Western competitors to fold simply doesn’t apply to REalloys the way it applied to every company that came before it.
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.
The expertise behind it goes back over 40 years, including eight years of hands-on collaboration with U.S. national laboratories and the Defense Logistics Agency.
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.
The company’s board reflects the seriousness of the undertaking: Chairman Stephen S. DuMont, President of GM Defense; General Jack Keane (Ret.), four-star general and recipient of the Presidential Medal of Freedom; former Saskatchewan Premier Brad Wall; and former Canadian Ambassador to the U.S. David MacNaughton.
The End of a 20-Year Losing Streak
For 20 years, China ran the same play against Western rare earth competitors and won every time. Prices would spike, Western capital would flood in and China would crash the market to wipe out the competition. It was a strategy so effective that most investors eventually stopped even trying.
But the ground has shifted. Demand for rare earth magnets is growing rapidly, as Morgan Stanley projects magnet demand rising three to five times over the coming decade…and that growth is being driven by defense mandates and national security policy, not speculative market conditions.
The impact of those mandates is being felt increasingly by the largest industrial and technology players in the United States. Companies like Microsoft (NASDAQ: MSFT) are scaling data centers and AI infrastructure that rely on advanced cooling systems, power electronics, and motors built with rare earth magnets. At the same time, defense giants such as RTX Corporation (NYSE: RTX) depend on rare earth inputs for precision-guided munitions, radar systems, and next-generation aerospace platforms. Meanwhile, industrial leaders like Honeywell (NASDAQ: HON) are embedding rare earth-dependent components across aviation systems, automation technologies, and energy infrastructure.
In other words, this is not just a supply chain issue anymore. It is a direct input into the operational backbone of America’s most critical industries.
Beyond the U.S, China itself now consumes roughly 60% of its own rare earth production for domestic manufacturing, which limits its ability to flood the global market the way it once could. And the 2027 DFARS deadline creates a hard requirement for non-Chinese material that no amount of price manipulation can eliminate.
For the first time in two decades, a Western rare earth company is operating with structural protections that China’s playbook was never designed to counter – from policy-mandated demand and government-backed financing to genuine technological independence and an operational facility that is already delivering to the U.S. defense establishment.
China’s strategy for maintaining its rare earth monopoly has always depended on one assumption: that Western competitors would remain exposed to market forces that Beijing controls. REalloys is the first company positioned to prove that assumption wrong. And the next 12 months will tell us whether the pattern that held for two decades has finally broken for good.
By. Michael Kern
Related Stories
