From Monopoly to Duopoly

Europe’s Strategic Blind Spot

Over the past few years, Western governments have spoken often about reducing dependence on China. But when you look at the actions being taken, a different picture appears.

In July, the U.S. Office of Strategic Capital received authority to deploy up to $100 billion. That single step makes the current situation clear:

Europe is not moving from dependency to independence.

It is moving from a Chinese monopoly to a US–China duopoly.

With no major European or UK critical-minerals projects being funded, no matching urgency, and no equivalent capital support, the realistic choice will not be “China or self-sufficiency.”

It will be China or the United States.

Unless Europe begins backing real projects — not only strategies and policy papers, but actual mines, refineries, and magnet facilities — it will remain outside the most important industrial build-out in decades.

This raises a straightforward question:

Do European policymakers believe that breaking the Chinese monopoly is enough, even though relying on a “peace dividend” last time left them strategically exposed?

Strategy Isn’t Policy

Why Europe’s Critical Mineral Projects Cannot Attract Capital

Europe and the UK continue to release critical-minerals strategies. These documents outline familiar aims: increasing domestic processing, reducing dependence on China, and building more resilient supply chains. On paper, the direction looks positive. In practice, almost no major project in this area has secured bankable financing.

The reason is simple. Strategy and policy are not the same. A strategy states what a government wants to achieve. A policy creates the conditions that make it possible. Europe and the UK have produced many strategies but have introduced very little policy that shifts risk in a way that attracts capital.

Critical-minerals projects face long development timelines, commodity-price volatility, jurisdictional risk, and in some cases first-of-a-kind processing requirements. These factors push the natural risk level beyond what most investors can support without some form of state participation. European capital markets function as they are designed to: they allocate capital where the balance of risk and return fits their mandates. When governments declare a project “strategic” but offer no risk-sharing, investors price the project accordingly — as high risk with uncertain delivery.

A former colleague once put it bluntly:

“When you see the word ‘strategic,’ read high risk.”

Investors behave this way because it has generally proven correct. Without policy support, valuations fall to a small fraction of the underlying economic potential. This is not a judgement on project fundamentals. It is a reflection of unmitigated risk.

Until governments move beyond strategy and introduce practical policies that share or reduce risk, Europe’s critical-minerals ambitions will remain difficult to deliver.

How Two Western Assets Became Part Of China’s Long Game

Over the past decade, two significant narratives have shaped the rare earth elements (REE) market: the revival of the Mountain Pass mine in California and the decline and eventual sale of the Ngualla project in Tanzania. While each story stands on its own, their interplay illustrates a critical trend: China has consistently out-strategised and out-manoeuvred Western capital markets. Mountain Pass may have remained operational, but at a cost that ultimately favoured China. Conversely, Ngualla, recognised as one of the world’s premier neodymium-praseodymium (NdPr) deposits, slipped from Western control at a fraction of its true value. This analysis is not merely commentary; it reflects two converging timelines with significant implications.

Mountain Pass: A Western Asset Sustained Through Chinese Leverage

Mountain Pass experienced a dramatic collapse into bankruptcy in 2015 after the Molycorp expansion proved unsustainable. This expansion was predicated on a temporary spike in NdPr prices, triggered by the China–Japan territorial dispute. Following the West's victory in the WTO case against China’s export quotas, Beijing retaliated by flooding the market, which led to a steep decline in prices and rendered Molycorp’s new processing circuit economically unviable.

In 2017, a consortium, including Shenghe, acquired the asset from bankruptcy. Shenghe's investment of approximately US$50 million in offtake and prepayment support facilitated the mine's restart. In return, Shenghe secured 100% of Mountain Pass' concentrate and nearly a 10% economic stake.

From 2017 to 2020, Mountain Pass operated primarily as a mining entity. While the upstream ore remained under U.S. ownership, the value-added processing occurred in China. When MP Materials went public via SPAC in 2020, U.S. investors transformed Mountain Pass into a strategic asset. Federal programmes reinforced this narrative, resulting in a significant valuation increase, with MP Materials trading at an estimated US$10–12 billion by 2025. For Shenghe, this meant that its initial US$50 million investment had appreciated to approximately US$800–950 million. Although Mountain Pass was nominally Western-owned, a substantial portion of the economic value generated from its revival ultimately flowed to China.

Ngualla: A High-Quality Deposit Undermined by Delays

Discovered between 2009 and 2010, Ngualla quickly emerged as one of the most promising NdPr deposits worldwide, boasting high-grade ore near the surface, low radionuclide levels, a straightforward mining plan, and successful pilot-scale metallurgical tests. However, the project faced significant challenges, including stalled Special Mining Licence approvals and a withdrawal of investor interest, rendering Western financing nearly impossible.

Despite efforts by Peak Resources to derisk the project and the delivery of an updated Bankable Feasibility Study (BFS) in 2022, prolonged regulatory uncertainty weakened the company's financial standing. Between 2023 and 2024, Shenghe acquired a 19.9% stake in Ngualla and, in 2025, moved to acquire the project outright for approximately US$90–100 million. While Peak Resources advanced the project through feasibility studies, major changes to Tanzania’s mining legislation in 2017 stymied momentum. The acquisition price represented a mere fraction of the deposit's underlying NdPr value, highlighting a significant disconnect between the resource's fundamental quality and the capital market's willingness to support it.

The Convergence: Two Timelines, One Outcome

When viewed in tandem, the dynamics of both situations become evident. Shenghe's MP Materials valuation surged by nearly a billion dollars from 2017 to 2025, while Ngualla's valuation plummeted due to regulatory delays and a lack of Western financing. The result was straightforward: a strategic Western asset that succeeded (Mountain Pass) and another that faltered (Ngualla) both inadvertently bolstered China’s position—one through capital appreciation and the other through acquisition.

The Western Role: Keeping Mountain Pass, Paying the Price

While the West often heralds the revival of Mountain Pass as a strategic triumph, the economic record suggests otherwise. The mine was sustained, but at a significant cost, much of which was paid to China. Without Shenghe’s support in 2017, the restart would not have been possible. Likewise, U.S. investor enthusiasm significantly increased Shenghe’s economic interest. Thus, while Mountain Pass remained operational under Western ownership, the value generated from its revival predominantly enriched Shenghe.

The Reality of the Ngualla Acquisition: A 2023 Decision Point

Shenghe's aim to acquire Ngualla was already established in 2023, independent of MP Materials' subsequent valuation increase. Shenghe would have sourced the necessary capital regardless. What shifted between 2023 and 2025 was the relative significance of the acquisition. The uplift in MP’s valuation merely diminished Shenghe’s accumulated capital gain from its Western asset exposure. The US$90–100 million needed to acquire Ngualla was absorbed within the broader capital gains context, enabling Shenghe to enhance its NdPr resource base by over 150,000 tonnes with limited financial impact.

Conclusion: One Pattern, Two Case Studies

Mountain Pass and Ngualla did not exist in isolation; they are interwoven elements of a larger narrative. China adeptly supported Western revival when it served its interests while capturing the value-added opportunities that others overlooked. Through this strategy, China accumulated capital gains realised in Western markets, which were then deployed to secure global resource positions.

In contrast, the West successfully financed Mountain Pass’s recovery but failed to protect Ngualla’s development. Consequently, China fortified its strategic position through both outcomes. These parallel stories culminate in a singular conclusion: China has masterfully outplayed Western capital markets, leveraging their mechanisms to enhance its strategic standing in the NdPr landscape.

Sources and Supporting Documents

MP Materials / Mountain Pass

MP Materials / Fortress Value Acquisition Corp, Form S-4 (Sept 2020)

MP Materials 10-K filings (2021–2024)

Form 8-K (April 2025)

U.S. Bankruptcy Court Case 15-11357 (2017 acquisition)

PRC MOFCOM Export Regulations, April 2025

U.S. Department of Defense funding announcements (2025)

Peak Resources / Ngualla

Peak Resources ASX Announcements (2017 BFS, 2022 BFS, 2023–2025 regulatory updates)

ASX Substantial Holder notice (26 March 2024)

Scheme Implementation Deed (15 May 2025)

Scheme Booklet & Independent Expert Report (Aug 2025)

Peak Resources resource statements and technical disclosures

Tanzania Written Laws (Miscellaneous Amendments) Act 201

Market and Regulatory Context

WTO Case DS431 (2014 ruling on Chinese export restrictions)

USGS Mineral Commodity Summaries, Rare Earths (2015–2025)

Asian Metal / SMM rare earth pricing archives

Industry reports on NdPr demand and price cycles

Africa at the Centre of the Transition Economy

The global energy transition is shifting industrial power in real time, and Africa is at the heart of it. Since my presentation in January 2025, the continent’s role in the global transition economy has become even clearer. As electrification accelerates and demand for critical minerals reshapes industrial strategy, Africa has moved from the margins to the centre of new supply chains.

Meanwhile, Europe has hesitated. While the UK and EU debated strategies and policies, others acted. China, the United States, and African institutions have stepped in to seize opportunities. The outcomes of projects like Ngualla in Tanzania and Longonjo in Angola show what decisive partnerships achieve—and what delay costs. Africa is moving with clarity. The question is whether Europe will participate or continue to watch the transition economy move on without it.

Africa’s Strategic Role in the Transition Economy

The global shift to clean energy is driving unprecedented demand for rare earth elements, particularly neodymium and praseodymium (NdPr), essential for permanent magnets in electric vehicles, wind turbines, robotics, defence systems, and emerging technologies. Outside China, processing capacity is minimal, leaving the world’s industrial base largely empty.

Africa, home to a significant share of the world’s critical minerals, is uniquely positioned to supply and shape these new value chains. Minerals like cobalt, manganese, graphite, copper, platinum-group metals, and rare earths are disproportionately located on the continent. Between a third and two-fifths of global critical mineral reserves are in Africa. Battery chemistries, wind turbines, hydrogen technologies, grid reinforcement, industrial electrification, and advanced manufacturing all rely on African resources—not as optional extras, but as structural necessities.

China’s Dominance and Africa’s Opportunity

Geopolitically, China controls around 40% of the world’s rare earth and critical mineral reserves, along with dominant processing capabilities. These resources are not available for Western diversification and are aligned with China’s long-term strategic goals.

This reality makes Africa the most viable source of non-Chinese critical minerals. Its centrality has been shaped as much by Europe’s hesitation as by African ambition. For over a decade, the UK and EU talked about securing critical minerals and reducing dependence on China. They published roadmaps and strategies, but when African partners sought early commitment and capital, Europe froze.

The result: China advanced into projects abandoned by Western financiers. The United States aligned with African-led developments. African sovereign wealth funds and development banks stepped into roles Europe had assumed would remain theirs. Europe lost ground not to competition, but to inaction.

Case Studies: Ngualla vs Longonjo

The contrast between two African rare-earth projects illustrates the consequences of commitment—or the lack of it.

Ngualla: A World-Class Project Left Behind

Ngualla in Tanzania is a globally significant deposit with exceptional geology and straightforward engineering. Tanzania had the chance to anchor a strategic industry. Yet when Peak Rare Earths needed early financing, Western capital did not step forward.

Tanzania’s fiscal terms—a 16% free-carried government interest, 3% royalty, and limited tax incentives—added pressure that only a committed partner could absorb. Policy resets between 2017 and 2021 further slowed approvals and created uncertainty. By the time Western interest emerged, it was too late. The project drifted through its critical window, highlighting the cost of hesitation.

Longonjo: Partnership in Action

In contrast, Angola’s Longonjo project demonstrates the power of clear partnership. Angola offered stable fiscal terms, including a 2% royalty, five-year corporate tax holiday, customs duty exemptions, and investor-friendly capital allowances. Its sovereign wealth fund, FSDEA, bought equity into Pensana, aligning financial interests and signalling confidence.

When Pensana’s share price fell in April 2023, Angola maintained stability. African institutions—including ABSA and the African Finance Corporation—added commercial and technical support. The United States later aligned behind the project. Today, Longonjo is the most advanced NdPr project outside China, achieved not through Western support, but because Angola chose partnership, clarity, and consistency.

Europe’s Missed Opportunities

Europe’s hesitation cost more than African projects—it cost downstream industries that could counter China. Teesside in the UK, a planned NdPr refinery dependent on Ngualla, never materialised. Saltend, another first-of-its-kind rare-earth separation facility, stalled due to lack of upstream financing. European capital markets, despite their rhetoric on strategic autonomy, failed to fund the projects needed to realise it.

Africa’s institutions stepped in where Europe did not. Projects that could have secured Europe’s industrial future now advance without it.

Africa Moves Forward

Africa has not been harmed by Europe’s absence. The continent is adapting, partnering, and setting terms to retain value. Europe, by contrast, has forfeited influence and ceded ground to China and the United States. Supply chains are forming without it, and early influence rarely returns once lost.

Africa is no longer a passive exporter. It is defining its role in the transition economy while Europe risks becoming a permanent taker of strategic materials rather than a maker of industrial futures. The decisive decade has begun. Europe must now decide whether it intends to be part of this future or continue watching from the shore.

Who got it, Who gets it, And Who Still Needs To Smell The Coffee

1. WHO GOT IT — CHINA’S 30-YEAR HEAD START

The story of how China came to dominate the global rare earth magnet industry does not begin with China. It begins in the laboratories of Japan and the United States in the late 1970s and early 1980s, when researchers at Sumitomo Special Metals in Osaka and General Motors in Indiana independently invented the neodymium-iron-boron (NdFeB) magnet. These were revolutionary technologies—one sintered, one bonded—that placed the West at the centre of a supply chain that would become foundational to electronics, automotive engineering, defence systems, and later the entire electrification economy. At that moment, it was unthinkable that China, then still industrially undeveloped, would one day control nearly every stage of this value chain.

What changed was not geology but a series of decisions, incentives, and industrial strategies that gradually shifted not just capacity, but capability—specifically IP and process knowledge—out of the West. The pivotal moment came with the sale of Magnequench, General Motors’ magnet subsidiary. Originally protected by conditions intended to keep production in the U.S., Magnequench was eventually bought by a consortium involving Chinese and Japanese interests. When those restrictions expired, the machinery, the people and the operational knowledge were relocated to Tianjin. The West did not merely lose a factory; it lost the tacit knowledge that underpins manufacturing: the “how”, not just the “what”. Magnequench was not the only example, but it was the most symbolic. It helped seed the first serious capabilities in China’s magnet industry.

Throughout the 1990s and 2000s, China’s approach to intellectual property followed a consistent pattern: IP was respected when convenient—and ignored when it created barriers to national industrial goals. Western companies entering the Chinese market often did so through joint ventures requiring technology transfer. IP enforcement was inconsistent, legal frameworks were still maturing, and the distinction between proprietary methods and broadly understood industrial practice blurred quickly. Magnet technology spread rapidly across Chinese plants through observation, replication and cumulative learning. Much of this happened long before Western patent holders mounted serious legal challenges.

Those challenges came, but too late. Hitachi Metals, which held hundreds of patents covering alloy compositions, sintering conditions, grain boundary diffusion and coercivity enhancement, eventually acted in China. The defining moment came when a lower Chinese court ruled that Hitachi’s patents were “monopolistic” and granted a compulsory licence allowing Chinese producers access to patented processes. Years later, China’s Supreme People’s Court overturned the decision—but by then most of the key patents had expired, and China had long since absorbed their value. The ruling was symbolic; the industrial outcome was already settled.

As these capabilities grew, China aligned them with deliberate industrial policy. Through the 1990s and 2000s, China expanded extraction, built vast solvent extraction complexes, developed metal and alloy production, and invested heavily in magnet-making cluster regions. Export quotas constrained the flow of rare earth materials to the rest of the world, protecting domestic industry. Subsidies and low environmental enforcement reduced costs. The strategy was simple: scale, integrate and undercut.

The moment the rest of the world finally recognised its vulnerability came in 2010, when a diplomatic dispute between China and Japan resulted in a temporary suspension of rare earth shipments to Japan. Prices spiked more than twenty-fold. Supply chains froze. Policymakers panicked. The U.S. attempted to rebuild its lost domestic industry through Molycorp, restarting the Mountain Pass mine and developing new processing operations. But Molycorp lacked modern midstream IP, lacked downstream alloy and magnet capability, and lacked the decades of accumulated operational experience China already possessed. When the WTO later forced China to remove export quotas, China responded by flooding the market with additional supply. Prices collapsed. Molycorp’s economics disintegrated. By 2015, the company was bankrupt. The West had lost the midstream a second time—first through IP migration, then through price warfare

2. WHO GETS IT — JAPAN, THE UNITED STATES, AND THE NEW STRATEGIC SUPPLIERS

Japan, meanwhile, drew a different conclusion. Determined never again to rely solely on China, and recognising the fragility of U.S. industrial capacity, Tokyo made a strategic investment in Lynas. JOGMEC and Sojitz provided financing, offtake guarantees and technical support. Lynas survived the price collapse because Japan treated rare earths as strategic. Molycorp failed because the United States did not. By the mid-2010s, Lynas had become the only major non-Chinese producer of separated rare earth oxides in the world.

Having achieved capability and dominance, China reversed its earlier openness. Advanced magnet-making technologies were reclassified as strategic. Export controls tightened. Technical information and talent became more restricted. Processes that had once been flexible to access became rigidly protected. China had completed the industrial cycle: open on the way up, closed once it arrived.

This is the landscape the United States re-entered in the 2020s—without domestic separation capacity, with minimal metallisation capability, with no large-scale magnet production and with defence supply chains fully dependent on China. The shift began not with markets but with policy. Section 1260H of the 2021 National Defense Authorization Act set a clear requirement: from 2027, the Department of Defense would be prohibited from procuring NdFeB magnets, SmCo magnets or components containing them if any stage of production originated in China. For the first time in four decades, the U.S. created a legal forcing mechanism to rebuild a non-Chinese supply chain.

Meeting the 2027 requirement required more than mining projects. It required IP. China’s advantage was built on 30 years of accumulated process knowledge. The U.S. could not simply “catch up” through investment. Instead, it began acquiring the IP it lacked.

ARA Partners’ acquisition of VACUUMSCHMELZE (VAC) brought one of the world’s most advanced magnet-making intellectual property bases—German, not Chinese—into the U.S. sphere. USA Rare Earth’s acquisition of Less Common Metals (LCM) in the UK brought Western strip-cast alloy IP under U.S. ownership. These two transactions recovered decades of lost capability.

The third pillar came not from acquisition but invention. ReElement Technologies developed a chromatographic separation and metallisation platform that reduces capex, slashes opex and avoids dependence on China’s large-scale solvent extraction complexes. Because ReElement’s process is new, American-owned and structurally different from legacy SX, it bypasses the IP bottleneck entirely. This offers the U.S. a genuinely alternative midstream technology—something it has not possessed in 30 years.

Upstream, projects aligned with U.S. strategic priorities began receiving EXIM and DFC funding: Serra Verde in Brazil, MP Materials in the U.S., and increasingly Pensana in Angola, which offers a non-Chinese, high-grade NdPr source backed by sovereign African capital. Pensana’s low strip ratio, renewable hydroelectric power, rail integration and proximity to port make it one of the most economically advantaged upstream projects in the world—synchronised with the 2027 timeline in a way few others are.

These developments represent the first coherent Western reconstruction of a rare earth magnet ecosystem since the 1980s. The strategy is fundamentally different from China’s, but based on the same principle: commercial capability, not rhetoric, determines industrial reality

3. WHO STILL NEEDS TO SMELL THE COFFEE — THE UK AND EUROPE

The UK and Europe have produced strategies, frameworks, risk assessments and declarations—everything except actual industrial capacity. While Japan wrote cheques and the U.S. wrote cheques and acquired IP, Europe issued press releases. The result is predictable: no large-scale separation plants, no metallisation, no magnet plants of consequence, and no cost-competitive alternative to China.

The UK’s Saltend project obtained planning permission but never funding. The EU launched the Critical Raw Materials Act yet still has no serious magnet capacity behind it. Across the continent, there remains a mismatch between political rhetoric and industrial execution. Committees form. Reports are written. But the factories, engineers and process IP simply do not exist.

In a market defined by cost, capability and learning curves—not declarations—Europe is becoming a spectator rather than a participant

4. THE REAL GAME — EXTRACTIVE ECONOMICS & MIDSTREAM INNOVATION

The West’s new supply chain blends reacquired IP (VAC, LCM), new IP (ReElement), advantaged resources (Pensana, Serra Verde, MP) and policy certainty (the 2027 DoD requirement). For the first time in decades, the pieces align.

Pensana demonstrates how a modern rare earth project can be built on fundamentally advantaged geology, low strip ratios, renewable power and integrated rail logistics—delivering feedstock at a cost base few competitors can match.

ReElement shows how new chemical engineering can reduce the capex and opex of separation and metallisation to levels that challenge the economic assumptions China has relied on for decades.

Together, these models create the first commercially credible route to produce rare earth products outside China at competitive cost.

5. CLOSING — IP AND INNOVATION TO NEUTRALISE CHINA’S ADVANTAGE

Ultimately, the only way to counter China’s dominance is through a combination of extractive economics upstream and innovation-driven efficiency downstream. Pensana demonstrates how a modern rare earth project can be built on fundamentally advantaged geology, low strip ratios, renewable power and integrated rail logistics — delivering feedstock at a cost base few competitors can match. But upstream advantage is only half the equation. The other half lies in technologies like ReElement’s, which reduce the capex and opex of separation and metallisation to levels that break the economic logic China has relied on for decades. Together, these approaches show the path forward: use resource quality and operational efficiency to drive costs down at the mine, then use new IP and new processes to drive costs down in the midstream. If the West can combine these two strengths — Pensana’s extractive economics and ReElement’s disruptive cost profile — it can finally begin producing rare earth products competitively enough to neutralise China’s advantage. In the end, this is what matters: IP and innovation deployed to deliver rare earths as economically as possible, turning strategic ambition into commercial reality.

From Complacency to Panic to Delusion — How the West Misread China’s Pause

The Policy Catalyst

In March 2025, the new United States administration under President Trump reintroduced a series of tariffs on Chinese industrial products, including electric vehicles, batteries, and critical minerals. The measures were justified as a response to what Washington described as “market distortion and state subsidy.” Beijing’s response followed just over a week later, not through tariffs of its own but through regulation. On 4 April, the Ministry of Commerce issued Announcement No. 18, designating several heavy rare-earth elements — samarium, gadolinium, terbium, dysprosium, and lutetium — as “dual-use technologies” under China’s 2020 Export Control Law. The message was clear: if Washington intended to use trade as leverage, Beijing would use access.

MOFCOM 18 set the tone for the rest of the year. It became the first in a series of policy actions that reshaped sentiment across the rare-earth industry and revealed how differently China and the West interpret economic strategy. Beijing acts within a coherent framework; the West reacts to headlines.

Complacency

For several years, critical minerals had been discussed in Western policy circles but rarely acted upon. Strategies were drafted, committees formed, and targets set, yet the investment required to build alternative supply chains never followed. Projects outside China were treated as interesting but non-essential. Investors assumed that China would continue to supply the world, just as it had for two decades. That assumption did not survive the re-emergence of tariffs.

The rare-earth market responded immediately to MOFCOM 18. Prices strengthened, trading volumes increased, and projects such as Pensana, Iluka, Arafura, Lynas, Vital Metals, and Mkango returned to analyst coverage. Their valuations remained low but began to rise for the first time in years. As the new export-licensing rules started to take effect, several automakers reported temporary factory closures and reduced production, citing the non-availability of magnets and alloys dependent on Chinese rare-earth supply. The classification of rare earths as dual-use materials signalled that these were no longer routine commodities but inputs critical to both industrial and defence manufacturing. The linkage between policy and production became visible within weeks.

Panic

Through the summer, confidence continued to build. The United States and Europe began to align policy on critical minerals, and financing discussions moved from theory to implementation. Export-credit agencies and development banks started assessing offtake-linked project funding. Pensana confirmed African backing for its Longonjo project, and construction was scheduled to begin. For the first time, the market was responding to delivery rather than narrative.

Then Beijing issued MOFCOM Announcement No. 62. It was not a refinement of earlier measures; it was a demonstration of control. The order expanded the April framework to cover not just materials but the full spectrum of rare-earth technology — mining, separation, smelting, magnet manufacturing, recycling, and any technical services or software that could support production outside China. It was a clear statement of ownership and intent, showing that Beijing was prepared to wield its advantage without hesitation.

The effect was immediate. Rather than cooling sentiment, the announcement intensified it. Investors interpreted it as proof that China regarded rare earths as a strategic instrument and was prepared to use them accordingly. The Financial Times described the order as “Beijing’s most comprehensive single-sector intervention to date.” For Western governments, it confirmed what developers had been arguing for years: diversification was no longer a commercial objective but a strategic necessity.

The rally only broke in the days before the Trump–Xi summit in Korea. On the Sunday preceding the meeting, U.S. fund manager Scott Bessant told a television panel that “a deal was done” and that China’s rare-earth restrictions were effectively over. Algorithms reacted instantly. Within hours, positions reversed. MP Materials in the United States and Lynas Rare Earths in Australia — then the sector’s two largest companies — led the decline. By mid-week, coordinated short positions had appeared across the sector from Sydney to London. The entire complex lost nearly forty per cent of its value in less than two weeks.

Companies that had just achieved major progress found themselves using that progress to stabilise their share prices. The fundamentals had not changed; sentiment had. The correction was not driven by operational failure but by misinterpretation.

Delusion

Beijing’s next move came on 7 November, when MOFCOM and the General Administration of Customs issued Announcement No. 70, a one-page notice suspending enforcement of the October controls for one year. The document did not revoke the earlier measures; it simply deferred their application until 10 November 2026. Yet the nuance was lost. Western media ran headlines claiming that China had “backed down.” Analysts and policymakers interpreted the announcement as evidence of de-escalation. Few had read the document itself, which existed only in Chinese.

The market largely missed that distinction. The announcement was interpreted as a relaxation of policy rather than a procedural delay. In reality, there appears to be no mechanism to extend or renew the deferral. Once it expires, the controls automatically return in full effect unless replaced by a new directive. The structure of the policy remains intact, unchanged in scope or intent.

The immediate reaction, however, was relief. Liquidity improved slightly, but conviction did not. Coverage across the sector thinned, and the term “non-Chinese premium” disappeared from analysis. Projects that had begun to attract fair-value attention were again priced as speculative. The West congratulated itself on a perceived diplomatic success, while China quietly retained every lever of influence.

Five days after MOFCOM 70 was issued, the market was still cautious. Prices had stopped falling, but there was no clear sense of direction. Investors understood that the logic for developing independent supply remained sound but were reluctant to act. The momentum created by funding and construction progress now has to rebuild itself under greater scrutiny.

Reflection and Reckoning

Share prices are inching higher, yet confidence is still lagging behind. The same companies that were finally recognised as undervalued before October now have to prove again what is already obvious: their fundamentals were never the problem — only perception. The West misread a pause as a concession and, in doing so, reinforced the leverage it hoped to avoid. MOFCOM 70 confirms China’s position: enforcement of the October rules is deferred, not withdrawn, and the April export restrictions remain in force. Nothing has been lifted; only the timeline has changed.

As the sector tries to make sense of events, Financial Times columnist Simon Edelsten offered a timely analogy. In his 8 November 2025 opinion piece, “AI bubble: don’t throw the baby out with the bathwater,” he warned investors not to mistake short-term volatility for structural failure. His words apply just as clearly to rare earths. The only thing most Western investors saw was an opportunity to profit from panic by shorting the very companies positioned to solve the problem. There was little recognition of fundamentals or of the long-term need for secure supply. The market trades on days and quarters; China plans in decades.

What changes now is time. The market has less than a year before the deferral expires and enforcement can resume without further notice. The pause is administrative, not ideological — a deferral, not a reprieve. MOFCOM 70 contains no provision for renewal; the deferral itself is not renewable. When the year ends, the original controls automatically regain force. The window for Western producers to demonstrate tangible progress is narrow. Momentum must return — not gradually, but decisively — because when the pause ends, Beijing does not need to announce anything new. It simply continues.

Who Are We Really Fighting? The West? China? or the Markets Between Them

THE PATTERN BEGINS

It started quietly. In the middle of October 2025, MP Materials began to soften after climbing toward an extraordinary high of around a hundred dollars a share. Nothing in its published numbers justified that price, but nothing justified what came next either. As MP began to fall, it dragged an entire sector with it—Australia Lynas, UK’s Pensana, USA Rare Earths and American Resources from the United States—companies that together represent a large proportion of the West’s attempt to build an independent rare-earth supply chain separate from Chinas monopoly.

In less than three weeks the group lost roughly half its market value. It wasn’t project failure or falling demand; it was the behaviour of markets that now react faster than they think. Watching it happen, felt like observing an automated reaction that no longer knew what it was reacting to.

THE SETUP

Through late September and early October 2025, trading volumes across the sector were unusually high. That was understandable. It came against the backdrop of escalating tension between the United States and China, where rare earths had again become part of the language of economic warfare. Beijing was signalling that it could weaponise its dominance in critical minerals. The rest of the world—particularly the United States—had to demonstrate it could respond.

That mixture of anxiety and opportunity drew investors in, pushing liquidity in rare-earth stocks to its highest levels in years. MP Materials, the largest Western producer with the highest market capitalisation, naturally sat in the crosshairs.

Short interest in MP had been elevated for months—reaching as high 34% of the free float in June 2025—but that extreme level itself didn’t create the selling pressure. At that time, the stock was trading around fifty dollars and the days-to-cover ratio stood at roughly eleven. It would have taken almost two weeks of average volume just to unwind the existing positions. With liquidity that tight, adding to shorts was hazardous: any sustained rally could have left funds unable to buy back shares fast enough to close their positions leaving them exposed to same situation they were exploiting. The scale of the short exposure showed conviction, but it also represented constraint.

What changed was liquidity. As MP edged toward a hundred dollars and trading volumes surged, the days-to-cover ratio collapsed to almost one. Suddenly, the equation flipped. The risk of being trapped disappeared, and with valuations now difficult to defend, the opportunity became irresistible.

By mid-October 2025, nearly eighteen percent of the stock was sold short—well down from Junes 34% but still unusually heavy position for a company of its size. On the following days, more than half of all trades were short sales. Once the first cracks appeared, capital rushed in to widen them.

BEYOND POLICY CONTROL — WHEN MACHINES RUN THE MARKET

Modern equity markets now operate with a level of automation that leaves policymakers reacting to outcomes rather than shaping them. Research by JP Morgan (2017) and the European Securities and Markets Authority (2023) shows that algorithmic and passive strategies account for most of the global trading activity, leaving less than ten percent to traditional discretionary investors.

These systems respond to movement, not motive. As the Bank for International Settlements (2020) observed, automated trading amplifies short-term volatility by reacting to order flow and correlations rather than fundamentals. The subsequent integration of artificial intelligence has intensified this reflex. The BIS (2024) noted that machine-learning models capable of analysing multiple markets simultaneously can reinforce one another when responding to similar signals, accelerating both rallies and declines.

Make it stand out

Whatever it is, the way you tell your story online can make all the difference.

Most investors outside the UK rarely encounter the mechanics of the London Stock Exchange (LSE), yet those mechanics shape how its company’s trade.

The LSE operates two main electronic systems: SETS, a continuous order book for liquid securities, and SETSqx, a hybrid model for smaller or less-liquid shares that relies on market-maker quotes and four daily auctions. Although both are LSE-domiciled, they connect through global liquidity networks with similar platforms, linking London’s trading flow to exchanges in New York, Frankfurt, Hong Kong, and Singapore. The result is a market, policymakers nominally oversee but no longer have any control—a self-sustaining ecosystem where liquidity, volatility, and sentiment circulate at machine speed.

Algorithmic and AI-based trading now form the reflexes of modern finance—efficient, fast, and largely self-referential. Market behaviour increasingly reflects the logic of code rather than the direction of policy. Decisions made in central banks or ministries move more slowly than the algorithms interpreting them.

THE SLIDE

Once MP began to slip, the machines took over. Large funds now rely on models that react to movement, not motive. They don’t ask why something is falling; they see that it is and search for connected names to trade the same way.

Within days the pattern spread through Lynas, Pensana, USA Rare Earths and to a lesser extent, AREC. Each market followed the next as the trading day moved from New York to Sydney to London.

Figure 2:Lynas, Pensana and AREC moved in lockstep with MP Materials. The sell-off spread globally across time-zones, driven not by fundamentals but by algorithms chasing correlation.

Fundamentals hadn’t changed; the correlation was mechanical. By the third week the decline was feeding on itself. Selling created more selling. For smaller companies like Pensana and USA Rare Earths, whose prices had never reflected even a fraction of their long-term value, the damage was wildly out of proportion

HOW THE SYSTEM AMPLIFIED IT

The rare-earth sell-off offered a clear demonstration of how that system behaves in practice. The link between these companies wasn’t geological; it was digital. All five traded on exchanges visible to the same network of U.S. investors and algorithmic funds. MP and AREC sat on NYSE and NASDAQ; Lynas on the ASX but tracked heavily by U.S. ETFs; Pensana on London’s SETS order book and cross-quoted on the U.S. OTC; USA Rare Earths on the OTCQX.

Every tick and order from these platforms feeds the same data engines. When MP fell, the others lit up on the same screens. Companies

like Mkango and Rainbow, however, trade on SETSqx—a slower, quote-driven system with periodic auctions rather than continuous matching. Their prices update less frequently and don’t feed directly into global trading models.

It wasn’t a question of quality; it was one of exposure. If your stock sits inside that global feedback loop, you move with it whether you deserve to or not.

This structural distinction became critical during the rare-earths sell-off. Pensana, which trades on SETS, appeared continuously in global trading models and was swept into the automated reaction that followed the fall in MP Materials. Mkango (MKA) and Rainbow Rare Earths (RBW), listed on SETSqx, were largely shielded. Their auction-based pricing refreshed too slowly to trigger the same algorithmic responses. The difference was not one of quality or fundamentals—it was structural exposure.

THE BOTTOM

On 6 November MP announced its quarterly results. The figures were solid—strong cash, no unpleasant surprises—but headline-scanning algorithms saw “earnings miss” and sold immediately. The share price dropped six percent within minutes. Then human investors read the report. The picture was fine. Within hours the stock had reversed course, finishing the session roughly twelve percent higher after the close as short sellers scrambled to cover.

The next day, 7 November, the reversal spread across the U.S. market. USA Rare Earths and AREC followed MP’s rebound almost point for point, climbing as the same shorts unwound their positions. That move happened after the London and Sydney markets had closed, which is why Pensana and Lynas didn’t move at the same time—their shares simply couldn’t trade. But for the US traded stocks. It was a textbook bottom—weeks of pressure released in a few hours of forced buying

Figure 3:After MP’s earnings release on 6 November, headline-scanning bots sold first, humans read later. Shorts were forced to cover, sending the whole group sharply higher — the mechanical rebound that marked the floor.

WHAT IT SHOWED

Parts of the sector had overheated, MP Materials most of all. Its valuation had become detached from its published numbers, with Lynas not far behind. But most of the sector, especially the developers, hadn’t yet reflected their underlying fundamentals.

This wasn’t a cleansing correction; it was a mechanical swing that shifted cash, NOT VALUE—mainly from private and retail investors to the trading desks that profit from volatility. MP and Lynas finished the episode still expensive. Everyone else finished it badly bruised and disillusioned.

It demonstrated how easily conviction investors can be flushed out under the appearance of “price discovery.” If this is what passes for efficiency, it’s hard to argue that it serves the industries governments claim to consider strategic.

TWO STEPS FORWARD, ONE STEP BACK

The pattern keeps repeating. Policy moves forward, Capital steps back. Governments announce critical-minerals strategies, alliances and funding frameworks, and within weeks the same markets tear down the companies those policies were meant to lift.

We talk about supply-chain security but trade as if volatility were the goal. The system rewards speed, not staying power. It celebrates risk management on paper but manufactures risk in practice. Each cycle drains confidence and leaves genuine investors more cautious.

IT IS IRONIC THAT THE RARE EARTHS IS SECTOR IS HAVING TO SPEND AS MUCH TIME SURVIVING ITS OWN CAPITAL MARKETS AS DEVELOPING ITS PROJECTS.

FIGHTING OURSELVES AS WELL AS CHINA

China’s advantage began as geological. The world’s largest rare-earth deposit—at Bayan Obo in Inner Mongolia—was first mined for iron. The rare-earth minerals lay literally in the waste. What other countries overlooked, China turned into an industry. By the late 1970s Beijing understood that those tailings contained the materials that would power future technologies: magnets, catalysts, electronics. It invested in processing plants, trained metallurgists and built a supply chain from the ground up.

Geology was the starting point, but policy turned it into power. China combined abundant resources with decades of coordinated planning. It accepted the environmental costs, subsidised processing capacity and pulled every stage of the value chain inside its borders until dependency itself became a strategic weapon.

The West, by contrast, treated geology as an export business, not a strategic asset. Open markets and short-term finance encouraged extraction over development. We mined, we shipped and we told ourselves that processing and manufacturing would happen elsewhere. That mindset still lingers. Even when governments intervene through the MSP, the IRA or EXIM financing, they’re pushing against markets wired for quarterly profit, not long-term security.

China uses capital as an instrument of state policy. The West treats it like sport. We celebrate policy announcements on Monday and short the beneficiaries by Thursday. It isn’t only a contest with China; it’s a contest with ourselves. China wins through unity of purpose. We lose through the absence of it.

The $1 Component that exposes a trillion dollar dependency

The title may seems sensationalist, but by some estimates, the subject component is less than a dollar and the total overall dependency may be  up to $5 trillion. This essay attempts to highlight how important it is for the rest of the world to build its own rare-earth supply chain. It is magnitudes more important than most people realise.

At the heart of almost every modern product — from cars and washing machines to robots and wind turbines — lies a handful of small, powerful permanent magnets. They’re made from rare-earth elements such as neodymium and praseodymium, and China makes almost all of them.

For twenty years, that didn’t seem to matter. China exported magnets cheaply and reliably, and Western manufacturers carried on as if access was guaranteed. But it wasn’t. It was policy.

By selling magnets at low prices, Beijing allowed the world to keep producing finished goods while ensuring the real profit stayed at home. Every kilogram of NdPr oxide sold abroad supported roughly a thousand times its value in downstream manufacturing — and most of that manufacturing was in China.

Now, that quiet generosity is ending. China’s own domestic demand for EVs, automation, and advanced appliances is consuming almost all of its output. Export licences are tightening, and internal allocations have become opaque. There’s no formal embargo — just a steady turn inward, a strategic denial through self-priority.

The Real Cost of Dependence

Permanent-magnet motors now underpin almost every part of the modern industrial economy. What once used wound-field or induction designs — washing machines, HVAC systems, pumps, power tools, vehicle seats, and windows — is quietly being replaced by compact, efficient permanent-magnet systems.

The magnets in these products often represent less than 0.1 % of total product value, yet without them, production stops. That’s the essence of China’s leverage: control of the input that defines who can manufacture the finished product.

Goldman Sachs estimated in September 2025 that a 10 % disruption in rare-earth supply could erase roughly US $150 billion in global output — a leverage ratio of about 1 : 2,500. Pensana’s latest investor presentation reproduced the chart, underscoring how a supply chain worth only a few billion dollars underpins industries worth trillions.

And it’s not just complex industrial systems that depend on these materials. Everyone has heard of an electric toothbrush — they just don’t consider what makes it possible. There’s roughly fifty cents’ worth of NdPr in each one, yet global sales of electric toothbrushes exceed US $4 billion annually (Grand View Research, 2024). That’s a thousand-fold multiplier on a component most consumers have never heard of. Multiply that across every appliance, every motor, and every actuator, and it becomes clear: a few billion dollars of rare-earth feedstock quietly underwrites trillions in global manufacturing value.

For years, depressed rare-earth prices acted as a strategic subsidy for China’s manufacturers. Western producers saw oversupply; Beijing saw investment. Every cheap kilogram of NdPr oxide sold abroad weakened a competitor and strengthened domestic industry.

Now, by retaining those kilograms, China keeps the margin chain that runs from raw material through to finished goods. Each tonne held back at home denies the rest of the world access to roughly a thousand-fold in industrial value that those magnets enable.

From Managed Dependence to Strategic Denial

The balance is shifting from managed access to strategic denial. This isn’t a new Cold War — it’s a new supply reality. China no longer needs to weaponise rare-earth exports; it simply needs to prioritise its own demand first. The result is the same: constrained supply, higher prices, and a narrowing window for Western re-industrialisation.

The Last Warning

This isn’t the first time China has reminded the world how much power sits inside its magnet supply chain. In 2010, after the Japan incident, exports slowed without a word being said. And again in 2025, the implementation of new export rules was delayed — a signal, not a concession.

The rest of the world is finally making the right noises, and for once, action seems to be following. Governments are funding critical-mineral projects, banks are underwriting mid-stream processing, and manufacturers are beginning to think seriously about material provenance.

But the effectiveness of these actions cannot be overstated — because China isn’t going to change its priorities to compensate for the West’s lack of planning. Its domestic economy will consume what it produces. It no longer needs to export to grow.

The urgency now lies entirely with us. This is no longer just a question of economics or industrial policy — it is a matter of national security. Access to permanent magnets underpins not only vehicles and turbines, but also defence systems, satellites, and the infrastructure that modern nations depend on.

To borrow a familiar maxim: “Lack of planning on your part doesn’t constitute an emergency on mine.”

That’s the unspoken reality of the rare-earth market in 2025 — and the reason why this may be the world’s last chance to build a truly independent mine-to-magnet supply chain without inflicting major economic and national-security damage by failing to do so.

#RareEarths #CriticalMinerals #SupplyChains #Manufacturing #EVs #EnergyTransition #IndustrialStrategy #Pensana #NdPr #PermanentMagnets #NationalSecurity

From Control To Optionality: China’s Rare-Earth Shift And The West’s Response

STRATEGIC DELAY, NOT CONCESSION

At the Xi–Trump summit, China agreed to postpone its new rare-earth export regulations until the end of 2026. The decision carried little cost but preserved every policy lever — quotas, licensing, and regulatory authority — while projecting moderation amid geopolitical tension. The objective was flexibility: Beijing can tighten or ease policy as conditions evolve.
Any renewal will fall under the 15th Five-Year Plan (2026–2030), which is expected to consolidate rare earths’ role as a core industrial foundation, directing more of China’s output toward advanced manufacturing and domestic consumption.
For the West, that means a permanent reduction in export-available feedstock and no alternative but to invest directly in its own upstream and midstream capacity.

TRADE TENSIONS AND POLICY TIMING

The delay coincides with renewed U.S.–China tariff exchanges. Beijing’s pause functions as a strategic holding pattern — maintaining leverage while the U.S. and its allies strengthen their own supply chains. The West’s magnet-supply initiatives, begun cautiously under previous administrations, are accelerating toward a more coordinated framework.

PIVOT TO A CONSUMPTION-DRIVEN ECONOMY

The 15th Five-Year Plan signals a shift from export-led growth toward a consumption-driven model. Rare earths will underpin domestic industries such as EVs, robotics, and renewable infrastructure. Export controls will serve to secure internal supply, not to penalise external markets.

LEVERAGE THROUGH FLEXIBILITY

By deferring implementation, China enhances its strategic optionality. The one-year pause keeps all outcomes available — enforcement, delay, or relaxation — while domestic industry continues without disruption. This is leverage through flexibility, not concession.

WESTERN RESPONSE AND SUPPLY-CHAIN INDEPENDENCE

G7 governments increasingly recognise that they are no longer China’s priority market. Their response is evolving from rhetoric to structure: aligning economic and security priorities to build critical-mineral resilience.

A mixed-finance model is emerging:

Development finance (EXIM, DFC, EIB) expanding underwriting for strategic projects.

Green-transition programmes (ATF, CRMA) widening eligibility for upstream capacity.

Private capital participating through quasi-sovereign guarantees that secure offtake and price floors.

An example is Pensana’s partnership with VAC, which references potential U.S. EXIM support under the Supply Chain Resiliency Initiative (SCRI) — an early model of allied mine-to-magnet collaboration.

FROM MANAGED OPACITY TO INFORMATION CONTROL

For two decades, China has maintained dominance through controlled opacity — publishing quotas and policy signals only when advantageous. With quotas withheld in 2025, Beijing appears to be reinforcing opacity to maximise flexibility and pricing power.
Western governments can no longer rely on Chinese data to anticipate supply or price movements.

DIVERGENT SYSTEMS: CONTROL VS VERIFICATION

Two frameworks are forming:

China Rest of World (ROW)

Policy driver Industrial self-sufficiency Supply-chain resilience

Pricing basis State-managed cost + margin Policy-supported price floors

Governance Controlled opacity Verified traceability

Capital source SOEs & provincial grants EXIM, DFC, EIB, ATF, private equity etc.

China is consolidating control through informational opacity to protect domestic priorities.

The West, in contrast, must establish independent verification — traceable origin data, ESG compliance, and auditable offtakes.

These proofs will become mandatory to access government-backed price floors and financing, embedding verification at the heart of Western policy support.