Rare Earths Market Outlook in 2026: Demand to Keep prices volatile

• Demand for rare earth magnets is expected to grow steadily in 2026, led by EVs, renewables and defence.

• China’s dominance in refining will continue to be the main source of price volatility and supply risk.

• New supply outside China will expand gradually but is unlikely to ease market tightness in the near term.

• Geopolitics and policy decisions, rather than pure market fundamentals, will remain the primary price drivers.

The global rare earths market in 2026 is expected to remain structurally tight and geopolitically sensitive, with demand growth outpacing the pace at which new, diversified supply can come online. The sector, once cyclical and opaque, has now become a strategic pillar for clean energy, advanced manufacturing and national security planning.

China will continue to sit at the centre of the market in 2026. While its share of global mine output has gradually declined over the past decade, China is still projected to control around 85–90% of global refining and separation capacity, according to industry estimates and data from the U.S. Geological Survey. This dominance means that even modest policy shifts, including export licensing, environmental inspections or dual-use controls, are likely to have outsized effects on prices and availability.

Demand fundamentals in 2026 look firm. Permanent magnets are expected to remain the fastest-growing segment, driven by electric vehicles, wind turbines, robotics and industrial automation. EV penetration is forecast to deepen across China, Europe and parts of Asia, while defence and aerospace demand is likely to stay elevated amid sustained global security spending. Together, these factors point to steady growth in consumption of neodymium, praseodymium, dysprosium and terbium.

Supply-Side Challenges

On the supply side, expansion outside China will continue but at a measured pace. Lynas Rare Earths Ltd is expected to remain the largest producer of separated rare earths outside China, with incremental capacity additions in Australia and Malaysia. Projects in the United States, Canada, Australia and Africa are advancing, but long permitting timelines, financing constraints and the technical complexity of processing mean that most will not materially ease market tightness in 2026.

Prices in 2026 are likely to stay above long-term historical averages but remain volatile. Analysts expect magnet material prices to be sensitive to policy announcements, export controls and diplomatic developments, particularly involving China, Japan, the United States and the European Union. Any escalation in trade or security tensions could quickly translate into price spikes, while periods of policy calm may lead to short-term corrections rather than sustained declines.

Government intervention will continue to shape the market. Strategic stockpiling, subsidies for downstream manufacturing and incentives for recycling are expected to expand across major economies. Recycling and urban mining will contribute marginal supply in 2026, but secondary sources are unlikely to displace primary production in the near term.

Overall, 2026 is set to be another year in which rare earths trade less like conventional commodities and more like strategic assets. The balance of risks points to continued tightness, high sensitivity to geopolitics and a slow, uneven path toward supply diversification.