China's Rare Earth Export Controls Squeeze Japanese Competitors
Miles Bennett
China's tightened rare-earth export controls have opened a 149× price gap on yttrium oxide between domestic and European markets, giving Chinese producers a window to grab high-end market share long dominated by Japanese firms.
What triggered the controls?
PM Sanae Takaichi's remarks on Tokyo's role in a hypothetical Taiwan Strait conflict prompted Beijing to tighten rare-earth export curbs on dozens of Japanese companies.
Beijing had already imposed controls in response to Trump's "Liberation Day" tariffs — a move analysts say has tilted the power balance toward China.
This means → rare-earth restrictions are no longer a pure trade lever; they are now a punitive tool tied directly to geopolitical signaling.
Where does the 149× price gap come from?
Yttrium oxide — a stabilizing additive for zirconia, widely used in electronics and industrial ceramics — is the hardest-hit material. China controls over 90% of global capacity.
Baiinfo data shows yttrium oxide at $7.88/kg in China versus $1,175/kg in Europe — roughly a 149-fold spread.
In plain terms = the same raw material costs two orders of magnitude more outside China. Whoever secures Chinese supply holds a crushing cost edge.
What are Chinese producers racing to capture?
Mysteel Shanghai analyst Rao Xinwei calls the controls "a historic opportunity for Chinese firms." Domestic producers are accelerating bids for overseas orders and upgrading technical capabilities.
Japanese companies used to import Chinese rare-earth feedstock, process it, and sell finished materials back to Chinese end-users. The controls cut that loop — Chinese buyers switched to domestic suppliers, who are scaling fast.
Six Chinese-listed companies in the zirconia and yttrium space have gained between 74% and 312% since the start of the year.
This means → capital markets are already pricing in the replacement of Japanese incumbents.
Does Japan's moat still hold?
Tosoh, Daiichi Kigenso Kagaku, and Shin-Etsu have long led in purifying and processing high-purity zirconia and yttrium oxide.
Rao notes that China dominates the mid-to-low end but still trails France and Japan at the high end.
This reflects a real opening for Chinese firms to push upmarket — but the technical gap will not close on price advantage alone.
How does the disruption reach Western end-users?
Chinese dental-materials maker Aidite told the Financial Times it received notice from Tosoh that zirconia powder deliveries would be suspended at a later date. Tosoh denied it had halted shipments to Aidite.
People familiar with the matter say Tosoh's dental-grade zirconia flows mainly to the US and Europe.
In plain terms = even though the controls directly target Sino-Japanese trade, supply shortages or supplier substitution will ripple down the chain to Western end-users.
What decides how this plays out?
Trivium China associate director Cory Combs says Chinese rare-earth producers have caught up with or nearly matched Japanese peers in recent years. As controls force Japan to burn through stockpiles faster, Japanese costs will rise and Chinese rivals will benefit.
The US is accelerating domestic rare-earth supply-chain efforts, but analysts expect it will take years to decades to materially reduce China's dominance.
This means → China's pricing power will only strengthen in the near term. The ultimate outcome hinges on whether Chinese firms can achieve a genuine high-end technical breakthrough — not just replace incumbents on price.
Content is for reference only, not financial advice.