Opinion: China truce could stall Canada’s rare earths

A longer trade truce with China could ease manufacturers’ rare earth supply fears while making potential Canadian alternatives harder to finance. On Nov. 9, Beijing extended the suspension of its broader October 2025 restrictions on rare earth exports worldwide until Jan. 10, 2027, matching its trade truce with Washington. Licensing rules introduced in April 2025 remain in force, including those affecting permanent magnets used in electric motors.

Access to established Chinese suppliers gives manufacturers a reason to postpone supply agreements with Canadian mine developers that could require testing new materials and accepting higher prices. Neither Wicheeda nor Strange Lake is producing. Buyers would be committing to future supply, helping developers obtain the financing needed to build their projects.

Government financing commitments for critical minerals reached about $65 billion (C$91.8 billion) in advanced economies in 2025, more than four times their 2023 level, according to the International Energy Agency (IEA). Capital spending fell 9% that year among 24 major mining companies tracked by the agency, with battery metals driving the decline. For Canadian rare earth developers, public backing still needs to be matched by customers willing to commit to alternative supply.

Easing Chinese controls could leave committed buyers paying more than competitors who hold off, the University of Sydney’s United States Studies Centre warned in September. The centre linked difficulty securing buyers to years of delay before Arafura Rare Earths’ (ASX: ARU) May 2026 investment decision for its Nolans project in Australia. Arafura requires binding sales agreements covering 80% of planned neodymium and praseodymium production before drawing senior debt, demonstrating why buyer hesitation can hold up financing.

Projects need offtakes

Defense Metals’ (TSXV: DEFN; US-OTC: DFMTF) proposed Wicheeda rare earth project in British Columbia received Export Development Canada’s June 2025 expression of interest in arranging up to $250 million in development and construction loans. Financing remains conditional on the lender’s project review, while a May 2026 supply and investment memorandum with South Korea’s Hanwha Ocean (KRX: 042660) and Hanwha Corp. (KRX: 000880) doesn’t guarantee purchases.

Those discussions need to produce binding sales of mixed rare earth carbonate for further separation, supporting Wicheeda’s target of completing a feasibility study and securing offtake in 2027 before closing financing in 2028.

Torngat Metals signed a 10-year agreement with French processor Carester in October 2025 for its Strange Lake project in northern Quebec, demonstrating that some buyers are already making long-term commitments to diversify. The contract covers a partially separated stream containing dysprosium and terbium for Carester’s Caremag subsidiary.

Torngat is seeking additional buyers for separated oxides from its proposed operation. Up to C$165 million of public lending announced in June 2025 supports preconstruction work, leaving the larger construction financing package to be assembled. Torngat is targeting mine commissioning in 2030, subject to regulatory approvals.

These examples show why customer commitments matter to financing; they do not establish that trade truces have delayed either Canadian project. The risk is that further extensions encourage buyers to postpone contracts or seek shorter terms, weakening the sales commitments available to support construction loans.

Supporting future supply

To sustain investment through further truces, Ottawa should negotiate pooled purchases with allied processors and magnet manufacturers, using capped public support to secure contracts with Canadian suppliers. Combining orders would spread the commitment across creditworthy companies, each responsible for specified quantities at minimum prices over a period that supports debt repayment. Processors would provide the link between Canadian mine output and the oxides magnet manufacturers require. Automakers should help fund those commitments, since tripling rare earth prices would add just 0.1% to a car’s price, according to the IEA.

Japan has already linked public backing with industrial purchases through Japan Australia Rare Earths, a joint venture of its state metals agency and trading house Sojitz (TSE: 2768). Its March 2026 agreement commits to buying 5,000 tonnes of neodymium and praseodymium annually from Lynas Rare Earths (ASX: LYC) through 2038 at a $110-per-kg floor. The arrangement gives Lynas predictable sales volumes and a minimum price.

Ottawa should assess whether the Canada Critical Minerals Accelerator could help finance similar purchasing agreements for Canadian rare earths, with allied governments sharing the cost. Its C$2 billion is an announced five-year allocation, with investments approved individually. Competitive bids would set a fixed public payment per unit to Canadian suppliers, payable against verified deliveries within agreed volume and time limits.

For illustration, a contract for a specified rare earth oxide might guarantee the supplier $100 per kg, with governments contributing $20 and the buyer paying $80. If equivalent Chinese material fell to $60 per kg, those obligations would remain unchanged. Public payments would be made only against verified deliveries within the agreed support limits.

Buyers would bear the risk of cheaper competing supply, while developers would remain responsible for construction and delivery.

For deliveries outside the public support limits, buyers would pay the full agreed minimum price, with no further taxpayer contribution.

Price support could lift the internal rate of return of a typical rare earth refinery outside China by about 2.4 percentage points at an average annual public cost of $18 million, according to IEA modelling.

Canada’s mineral future cannot depend on another disruption in Chinese supply. Beijing may extend its suspension again beyond Jan. 10, so Ottawa should use the Nov. 18–19 Asia-Pacific Economic Cooperation leaders’ meeting in Shenzhen, China, to begin negotiations with allies on pooled purchase contracts. Those contracts would help Canadian projects secure construction financing even if relations with China improve.

Noah Chaikin is a strategy consultant in Kearney’s Foresight practice in Toronto, advising executives on geopolitics, critical minerals and economic security. The author has no client relationships with the companies named in this article. The views expressed are his own.