REBUILDING A BROKEN MARKET: RARE EARTHS AND A NEW MARKET INFRASTRUCTURE
WHEN THE FRACTURE BECAME VISIBLE
When MP Materials announced its structured pricing arrangement with the United States Department of Defence last July, it was not the moment the rare-earth pricing system broke — it was the moment the break was publicly acknowledged. For years, Chinese domestic benchmarks had been treated as global reference points even as real transactions quietly drifted away from them. July simply forced the industry to recognise what had already happened: published prices no longer reflected real clearing prices outside China.
Behind those benchmarks, the market itself had changed. Rare-earth production progressively concentrated almost entirely inside China. Non-Chinese mines closed or stalled under sustained low prices. Processing capacity outside China disappeared. Export volumes became residual rather than central to the industry. As supply moved inward, liquidity followed, and price formation followed with it. At the same time, transactions migrated into confidential long-term contracts with major Chinese buyers, export controls added friction, and spot liquidity thinned to marginal activity. What remained offshore were fragmented, opaque trades that could not support genuine price discovery.
The result was structural. There was no longer a credible external clearing market at all. Published prices reflected internal Chinese dynamics rather than global reality. For capital markets assessing new supply projects outside China, there was no transparent benchmark on which to rely. Investment stalled even as physical conditions tightened. Over subsequent months, availability thinned further, Chinese domestic prices firmed, and export liquidity deteriorated. The market was under supply pressure, yet capital remained constrained because price discovery outside China no longer existed
REFRAMING THE PROBLEM: FROM PRICE LEVELS TO MARKET STRUCTURE
Shortly after this became evident, a paper circulated within a small Telegram group reframed the issue away from price levels and toward the market mechanism itself. It argued that the rare-earth challenge was no longer primarily about scarcity or Chinese dominance, but about the collapse of price formation outside China.
With production overwhelmingly Chinese, most volume tied up in opaque contracts, and spot liquidity effectively gone, there was no longer any process through which transparent prices could form for the rest of the world. Capital markets were being asked to finance projects against reference prices that no longer represented real transactions
THE JULY FRAMEWORK: REBUILDING THE MARKET
The paper suggested that without reconstructing market structure, neither optimism nor subsidies would unlock meaningful non-Chinese supply. The solution was not price intervention but market formation.
Large-scale non-Chinese demand needed to be deliberately anchored to restore liquidity. Repeatable transaction flows would generate a genuine external benchmark grounded in real clearing prices. A dynamic stockpile would continuously rotate material through the market, preventing the stop-start trading that had destroyed liquidity. Once continuous price formation existed, banks and investors would finally have something real to underwrite.
The logic was straightforward: without sustained demand there is no market; without a market there is no price discovery; without price discovery capital will not fund production. Volumes around 10,000 tonnes of NdPr oxide were identified as the minimum scale required to move from symbolic trades to true market-making liquidity.
The objective was not to support prices, but to recreate a functioning market outside China.
FROM THEORY TO POLICY: PROJECT VAULT
Seven months later, policymakers arrived at a similar structural conclusion.
In February 2026, Project Vault — structured through the Export-Import Bank of the United States — was announced as a national framework to stabilise critical mineral supply chains. It was not designed as a price floor or a subsidy programme. It directly addresses the market failure that had constrained investment.
Project Vault anchors large, guaranteed demand from strategic buyers and channels it through structured, repeatable transactions rather than one-off offtake agreements. By standing behind those flows with credit support and risk compression, it restores continuous liquidity and enables transparent transaction pricing at scale. Rather than manipulating price, it restores the mechanism that produces price.
It is market-infrastructure policy rather than supply subsidy.
THE CONVERGENCE
Placed alongside each other, the July framework and Project Vault follow the same structural logic. The paper argued that functioning markets had to be rebuilt through anchored demand, continuous liquidity, dynamic stock rotation, and transaction-driven price discovery before capital would return. Project Vault now applies those same principles at institutional scale.
The form differs. The underlying mechanics do not.
What unfolded between July and February reflects a shared diagnosis of the same market failure. Both independent analysis and policy design reached the conclusion that resilient supply chains require functioning markets rather than price intervention, that price discovery must be rebuilt through real transactions and liquidity, and that capital responds to transparent, credible benchmarks.
Project Vault is not about supporting prices.
It is about restoring market structure.
And in doing so, it mirrors the framework that emerged when the rare-earth pricing system’s structural breakdown became visible.
ADDENDUM:
From Analysis to Action — The July 2025 Framework
The following paper was circulated privately on 7 July 2025 — three days before the public announcement of structured pricing arrangements between MP Materials and the U.S. Department of Defence — and reframed the rare-earth crisis as a failure of market structure rather than price levels
At the time, the dominant policy debate remained centred on subsidies, price support, and isolated offtake agreements. The July framework instead argued that the core failure was structural: without functioning markets, transparent price formation could not exist — and without price discovery, capital would not fund new non-Chinese supply.
Seven months later, Project Vault institutionalised many of these same principles at national scale.
This addendum is included not as commentary, but as contemporaneous evidence of the analytical foundation that anticipated today’s market-infrastructure approach.