PRICE FLOORS, MARKET SIGNALS AND THE RACE TO COMPETE WITH CHINA
A DEBATE BORN OF A BROKEN MARKET
For much of the past two years the debate around rare earth price floors has been framed as a binary choice between free markets and intervention. In practice it has been shaped far more by broken market conditions, national security concerns and the behaviour of capital itself. That tension resurfaced in late January when a report by Reuters suggested that U.S. policymakers were stepping back from the idea of guaranteeing minimum prices for critical minerals projects, instead emphasising the need for projects to demonstrate commercial viability without pricing support. Based on unnamed sources, the article was interpreted by markets as a potential retreat from one of the stabilisation tools that had emerged during the sector’s recent downturn.
The market reaction was immediate, with rare earth and critical-minerals equities falling sharply as investors once again repriced policy risk into project economics. Commentary that followed, including analysis carried by Yahoo Finance, made clear that price floors had not generally been viewed as permanent protection but rather as transitional mechanisms designed to reduce early cash-flow risk in a market that had ceased to function normally. When MP Materials subsequently clarified that its existing arrangements remained unchanged, and Reuters softened elements of its original framing, it became evident that the repricing had not been about operational fundamentals. It had been about confidence in how Western supply chains would ultimately be built.
That same question soon surfaced publicly in a LinkedIn exchange involving Mark Jensen of ReElement Technologies Corporation and policy-finance voices associated with the Export-Import Bank of the United States. What emerged was not a clash of ideology but two phases of the same industrial transition: the need to unlock capacity in a damaged market, and the necessity of ultimately building supply chains capable of competing without permanent protection
WHEN PRICING STOPPED MAKING ECONOMIC SENSE
To understand why price floors entered the discussion at all, it is only necessary to look back a short distance. The lowest NdPr pricing point was not years ago but barely eighteen months ago, when prices collapsed to around forty-five dollars per kilogram. These levels did not merely compress margins; they failed to cover production costs across the industry, including for many Chinese producers themselves. This was not a normal commodity downturn but evidence that pricing could be driven below sustainable economics for extended periods, even at the cost of losses within China.
For capital markets, that moment reshaped risk perception. What had once been treated as cyclical volatility began to look like structural price warfare. Financing retreated, equity risk premiums rose sharply, and new project development slowed dramatically. It was in this environment of systemic market failure, rather than ordinary cyclical weakness, that stabilisation tools emerged. They provided a bridge when the market offered no natural support mechanism, but they also carried a strategic message. China’s dominance had long relied on a familiar cycle of aggressive capacity expansion, deliberate price suppression to eliminate competitors, and subsequent tightening once alternatives disappeared. Price floors represented the West’s first serious attempt to neutralise that mechanism, functioning as deterrence as much as financial stabilisation
RECOVERY, BUT WITH DISCIPLINE RATHER THAN OPTIMISM
Since that collapse pricing has rebounded sharply. Chinese domestic spot prices have roughly doubled, while FOB China prices paid by the rest of the world before tariffs have almost tripled. Yet the recovery has not restored an easy environment for the sector. Instead it has introduced selectivity. For the most competitive projects, those with disciplined capital structures, integrated processing and resilient cost curves, today’s pricing is clearly economic and, in some cases, highly attractive. For many higher-cost developments, however, it remains marginal. The market has not returned to broad optimism; it has imposed discipline. Capital is now filtering aggressively toward projects capable of surviving another downturn rather than those dependent on favourable pricing alone
THE SHADOW OF THE COLLAPSE STILL SHAPES CAPITAL
Despite the rebound, financing behaviour has not reset. The forty-five-dollar trough remains the dominant reference point in risk models, investment committees and lender stress tests. Projects are assessed less on whether they work at today’s prices than on whether pricing can again be forced below sustainable levels and for how long. This lingering memory explains both why stabilisation tools emerged and why markets remain extraordinarily sensitive to policy signalling around them. Investors are not reacting to current revenue strength; they are reacting to perceived downside protection.
FROM STABILISATION TOWARD COMPETITIVE STRUCTURE
As geopolitics and economics continue to evolve, policy tools are evolving with them. With prices now economic for the strongest projects and capital increasingly able to distinguish resilience from fragility, broad price intervention is becoming less necessary and potentially counterproductive. What is emerging instead is conditional support tied to competitiveness, backing supply chains expected to scale precisely because they are capable of standing on their own. Support is increasingly being provided where it is unlikely to be needed indefinitely. The objective is no longer simply to ensure supply exists but to build supply chains capable of surviving and winning in open markets.
This is where the long-term logic articulated by Jensen aligns with the direction of travel. Competitiveness, not permanent protection, is the only sustainable endgame. At the same time, intervention remains justified when markets are distorted or temporarily broken. When pricing ceases to reflect economic reality and instead functions as a strategic weapon, stabilisation preserves future competition rather than replacing it. In that sense, intervention operates as a bridge — necessary when markets fail, but designed to become irrelevant as competitive structures emerge
WHY PRICE WITHOUT VOLUME IS NOT A STRATEGY
What is often lost in upstream debate is that mining economics depend on volume as much as price. High pricing alone does not create a viable industry if it undermines downstream adoption. Rare earth producers ultimately require sustained throughput into magnets, motors and manufacturing supply chains. In practical terms, zero volume multiplied by a high price still equals zero. If artificial pricing mechanisms push feedstock costs above globally competitive levels, downstream manufacturers do not absorb those increases out of strategic loyalty; they source elsewhere, and in today’s market that almost always means China.
China’s dominance was never built on maximising price per tonne but on maximising throughput across the entire value chain. Lower margins, massive volume and industrial scale created resilience that no high-price, low-volume model can replicate. Permanent or elevated price intervention risks supporting upstream optics while quietly destroying the volume base that makes long-term mining economics viable. Mines may be built while markets are still lost.
Recent pricing dynamics may even suggest a shift in strategy. Where oversupply once crushed non-Chinese miners directly, tighter feedstock control now appears to raise costs downstream outside China, making rest-of-world magnets and finished products less competitive while preserving domestic advantage. Whether driven by policy intent or supply-demand mechanics, the effect aligns perfectly with Chinese economic objectives: dominance maintained not by eliminating mines, but by controlling manufacturing competitiveness.
A LIGHT AT THE END OF THE TUNNEL
What is encouraging is that early signs are beginning to emerge of a shift in thinking, from a framework driven almost entirely by national security supply concerns toward one increasingly informed by competitiveness. In the immediate aftermath of the price collapse, the overriding objective was simply to ensure that non-Chinese supply chains survived at all. Stabilisation tools emerged because the market had ceased to provide that security. As prices recover and capital discipline slowly returns, a longer-term perspective is starting to take hold among parts of the market. The conversation is no longer exclusively about guaranteeing supply at any cost but increasingly about how to build supply chains capable of competing on price, reliability, scale and integration.
This shift is far from complete. Many projects remain in a phase where survival and early support still dominate decision-making, but alongside this a growing cohort of investors, policymakers and industrial players are beginning to focus on structural competitiveness as the true endgame. What is emerging is not yet a transformation but a direction of travel — a light at the end of the tunnel rather than the destination itself.
Supply that exists only because it is protected remains strategically fragile, while supply that wins volume in open markets becomes durable. Price floors help repair broken markets. The future will be built by competitive supply chains. Independence will not be secured by protected prices, but by the ability to compete — and to sell at scale.