Why Are Rare Earth Stocks Falling When Prices Keep Rising?
By ZeroHedge - Oct 21, 2026, 12:00 PM CDT
- Ex-China NdPr is up 23% year to date and now sits above the US$110/kg floor, yet Canaccord's rare earth producers are down 28% and developers are down 17% on average.
- Western buyers pay steep premiums for heavies: Rotterdam dysprosium at about $1,074/kg vs. $227 in China, North American samarium at 346x the Chinese price, and Japan warning of a severe yttrium shortage by year-end.
- Canaccord has producers at 0.57x P/NAV and sees 104% upside in MP Materials, while tungsten miner Almonty shows the same disconnect ahead of new U.S. defense sourcing rules on Jan. 1, 2027.
Here is a question that should be harder to answer than it is: China still controls the rare earth spigot, the latest Trump-Xi summit did nothing to loosen its grip, Japan is about to run out of yttrium, Washington has put a $110/kg floor under NdPr, and Western buyers are paying anywhere from 5x to 346x the Chinese price for heavy rare earths.
So why are rare earth stocks down on the year?
That is the question Canaccord's critical minerals team led by Reg Spencer asks in an overnight note titled "Rare Earths: Equity disconnect from strong market fundamentals," and the answer is blunt:
Given our favourable SxD outlook, floor pricing, recent pricing stability (NdPr), and Western pricing premiums (particularly for heavies), we think recent equity performance has been driven more so by global macro factors and highlights a disconnection from rare earth market fundamentals.
In other words, the commodity is acting like a strategic asset and the stocks are trading like a risk-off casualty. The numbers are stark: year to date, the ex-China NdPr price is up 23%, while Canaccord's rare earth developers are down 17% on average and its producers are down 28%.
Canaccord's chart shows the problem in one picture. Chinese NdPr and Rotterdam NdPr have converged and climbed steadily all year, with the Western price now above $110/kg. Meanwhile the REMX ETF peaked in May and has since slid from above $100 to the high-$50s.
The carnage is broad. On the producer side, Lynas, MP, USA Rare Earth and Iluka are all deep in the red, and even China Northern Rare Earth and Shenghe are lower on the year.
Canaccord's verdict: "We question how equities have performed so poorly YTD despite strong underlying market fundamentals." Those fundamentals include recent sector M&A, direct government support, a scarcity of Western supply and "ex-China NdPr pricing up 23% YTD."
The Floor Works... Just Ask China
Start with the most important structural change of the past year. As Washington moved from financing Western supply to underwriting its economics, it set price floors: US$110/kg NdPr for MP (DoD), Lynas (Japan, US, plus upside sharing) and USA Rare Earth, which also gets US$575/kg for dysprosium and US$2,050/kg for terbium.
And the floor has done something nobody expected: it has tamed the Chinese price too. Over the past 10 months, Canaccord notes, Chinese pricing has "begun to normalise around the US$110/kg floor price level."
Put differently, the volatility that made rare earth projects unbankable has largely vanished, and yet investors are paying less for those projects than they did in January.
Two Markets, Two Prices
NdPr is now a one-price market, more or less. Everything heavier is a different story. Since Beijing started rationing heavies, the West has developed its own (thin, opaque) price for anything China won't ship, and the gaps are absurd. Rotterdam dysprosium sits around $1,074/kg vs $227 in China, and terbium at $4,594 vs $983.
But Dy and Tb are the tame ones. Canaccord now forecasts yttrium, gadolinium and samarium for the first time, and the Western premiums there are almost comical. Chinese yttrium oxide has averaged about $8/kg over the past five years, while European spot is ~US$740/kg, a premium of 85x, and some price reporting agencies have quoted US prices of up to US$1,750/kg. Gadolinium trades about 10x China in Baltimore, with US CIF quotes as high as $3,100/kg.
CIF North America samarium, used in the SmCo magnets that go into missiles, fighter jets and radar, trades at 346 TIMES THE CHINESE PRICE.
And the squeeze is very real. Japan has made an urgent request to Washington and global companies to help resolve its yttrium crisis, warning of a severe shortage by year-end. Inventories are plummeting. Per Argus, yttrium oxide costs about $9/kg in China and roughly $1,150/kg outside it, a 179-fold jump in two years.
Demand Goes Up, Again
Meanwhile the demand side keeps getting revised higher. Canaccord now sees NdFeB magnet demand growing at a 7.3% CAGR to ~365,000 tonnes by 2035, 15% above its prior update. EVs remain the anchor, but the bank has added data centers (motors for cooling), e-bikes and scooters, and drones.
Then there are the robots. Canaccord models humanoid deliveries growing at a 45% CAGR to 2.5 million units by 2035, and points out that Tesla is reportedly preparing an Optimus line designed for 1 million robots a year.
Netting it all out, Canaccord sees the global NdPr market in deficit through 2028, roughly balanced in 2029-31 as new expansions come online, and then sliding back into a deeper deficit: -10% by 2035. Dy+Tb follows the same shape, ending at a 12% deficit.
The West's Blind Spot
The bulls' case gets even stronger once you look past the mines. Canaccord forecasts ex-China NdFeB magnet capacity rising more than 300% by 2030 to about 70,000 tonnes, which sounds impressive until you realize it would still be only 23% of global capacity, with China at ~77%.
And the West may not even get there, because it is missing a step. Global NdFeB metallisation and alloying capacity is about 210,000 tonnes in 2026, and more than 90% of it is Chinese controlled. Canaccord calls metallisation "a major blind spot in western supply chain development."
Wall Street Is Paying 50 Cents On The Dollar
Which brings us to valuation. Canaccord's producer coverage trades at an average 0.57x P/NAV and its developers at 0.47x. On the bank's targets, MP has 104% upside, Lynas 108%, USA Rare Earth 204% and Energy Fuels 150%.
Of course, price targets have a habit of following prices rather than leading them, and at least some of the selloff has a perfectly sensible explanation: these are long-duration, capex-heavy projects at a time when the 10Y is above 5%, tech is wobbling and the bid for anything speculative has evaporated. Canaccord concedes as much, blaming "global macroeconomic pressures."
Same Disconnect, Different Metal
Tungsten isn't a rare earth, but it is a critical material with the same chokepoint (China controls roughly 80% of supply), and it shows the exact same disconnect, only worse. Take Almonty Industries (ALM), the most prominent Western tungsten miner. Tungsten prices are up 8x since the start of 2025, yet the stock is down 62% from its April peak.
On January 1, 2027, US defense procurement rules extend to tungsten mining, refining and separation, so Chinese or Russian ore processed in a third country no longer qualifies. Stifel says the US strategic tungsten stockpile is nearly depleted, and Bernstein sees the Western rearmament order boom running from 2027 through 2030.
In other words, spot is pricing today's bottleneck in Western processing, and the stock is pricing spot, while the 2027 demand cliff is priced almost nowhere.
When Macro Lets Go
Today we have a two-month trade truce that expires January 10, a Japanese government begging for yttrium, the West's flagship tungsten miner trading below even Goldman's skeptical target ten weeks before the Pentagon's sourcing rules kick in, a floor price that has turned NdPr into a one-way bet with a safety net, and an equity market that is valuing the West's only scalable non-Chinese suppliers at roughly half of what they're worth on conservative assumptions.
Canaccord's closing line sums it up: "We expect demand to remain strong, as the West looks to secure ex-China supply and build its independence within the global magnet supply chain."
Our take: the disconnect will probably close the same way it did last summer, with a headline out of Beijing or the Pentagon, and the investors waiting for macro to give them the all-clear will be buying it 50% higher. After all, nothing cures a 0.5x P/NAV like a 346x price premium.
