Prices for two critical rare earth elements used in high-performance permanent magnets - neodymium and praseodymium (collectively NdPr) - have risen sharply, moving above a U.S.-backed price floor established last year for miner MP Materials. The Chinese NdPr oxide benchmark has reached 850,000 yuan per metric ton, equivalent to $123 per kilogram, marking the highest level since July 2022.
The near doubling of prices over the past seven months has an immediate policy implication: the U.S. government will not need to provide the price support it guaranteed to MP Materials for NdPr output so long as the market price remains above the agreed threshold of $110 per kilogram. That arrangement was part of a broader deal intended to help MP better compete with Chinese producers.
Analysts and industry specialists attribute the rally to a combination of firm downstream demand for magnets and deliberate supply management in China. "The price rally has been driven by firm downstream magnet demand and deliberate supply management in China," said Neha Mukherjee, research manager for rare earths at consultancy Benchmark Mineral Intelligence. Mukherjee warned, however, that the current elevated levels are likely transient, and she expects a downward correction by the end of March.
NdPr prices have spent recent years under pressure from oversupply. In March last year they fell to 345,000 yuan per metric ton, a low not seen since November 2020. The jump to 850,000 yuan per metric ton represents a substantial recovery from the $63 per kilogram level recorded on July 9, the date MP Materials unveiled its multibillion-dollar agreement with the U.S.
The stronger pricing will also benefit other rare earth producers outside China, an outcome Western governments are seeking as they attempt to reduce dependence on the world's dominant supplier. China currently accounts for approximately 90% of global refining capacity for rare earths and about 70% of mined output, underscoring its central role in the supply chain.
As part of the U.S. arrangement with MP Materials, the Pentagon set the price support at $110 per kilogram for NdPr and required the company to stop sending mined output to China. Prior to that stipulation, MP's material had accounted for roughly 7% to 9% of China’s NdPr oxide production over the preceding three years, according to consultancy Adamas.
The removal of MP shipments from Chinese supply coincided with tighter availability in China itself, which analysts have linked to lower mining and smelting quotas. Chinese authorities, however, did not make a public statement announcing quota cuts. Observers caution that while many mining operations can sustain production at current prices, the near-term tightness does not necessarily reflect long-term market fundamentals.
Currency reference: $1 = 6.9080 Chinese yuan renminbi.
Summary
NdPr oxide prices have climbed to $123 per kilogram, surpassing the U.S. price-support floor of $110 set for MP Materials. The increase, driven by strong magnet demand and supply adjustments in China, reduces the immediate need for U.S. subsidies to MP. Analysts expect the spike to be temporary, with possible downward correction by the end of March.
Key Points
- NdPr oxide benchmark rose to 850,000 yuan per metric ton - $123 per kg - the highest since July 2022.
- The U.S. price-support agreement for MP Materials at $110 per kg is no longer required while market prices stay above that level, lowering near-term fiscal support needs.
- Sectors affected include EV manufacturing, defense equipment that use high-strength magnets, and mining and refining companies focused on rare earths.
Risks and Uncertainties
- Price volatility - Analysts expect a possible downward correction by the end of March, which could pressure miners and refiners that expanded production in response to the rally.
- Supply concentration - China's dominance of refining and large share of mined output (around 90% and 70% respectively) leaves global supply vulnerable to policy shifts or quota adjustments that are not always publicly announced.
- Policy and contractual changes - Conditions tied to government support, such as restrictions on shipments to China, can abruptly alter flows and availability in the short term.