Japan’s manufacturers are drawing on inventories and alternative suppliers after Chinese shipments of dysprosium and terbium products reportedly fell to zero in the first half of 2026.
By Penny Langford
**TOKYO : ** Japan’s supply of heavy rare earths has tightened sharply after China’s exports of dysprosium and terbium products to the country reportedly fell to zero in the first half of 2026, raising the prospect of shortages lasting into 2027.
The disruption is placing pressure on Japanese manufacturers that supply permanent magnets for electric vehicles, hybrid vehicles, industrial machinery and defense systems. It is also tightening access to yttrium, a separate rare earth used in protective coatings for components in semiconductor manufacturing equipment.
A Caixin report, citing an analysis by commodity pricing agency Argus, said Japanese manufacturers could currently secure only about two-thirds of their required rare-earth supply. Projects supported by Japan’s Organization for Metals and Energy Security, or JOGMEC, may require another one to two years to reach large-scale production, Argus said.
That timeline puts the sector at risk of a prolonged squeeze rather than a short-term shipping interruption.
Dysprosium imports fall 82%
Japan imported only 13 metric tons of dysprosium in the first half of 2026, down 82% from the same period in 2024, according to data reported by Nikkei and summarized by TrendForce.
Imports were recorded at zero in January, February, May and June. Separately, Chinese customs data cited in recent reporting showed no exports of dysprosium or terbium oxide from China to Japan during the period.
The fall is significant because Japan remains one of the world’s most important centers for rare-earth magnet production despite having limited domestic access to the mined and refined materials used in those magnets.
China’s influence extends across the supply chain, from mining and separation to the production of rare-earth oxides, metals and alloys. That concentration leaves Japanese manufacturers exposed when export approvals are delayed or shipments are halted.
| Indicator | First-half 2026 position | Reported change or implication |
|---|---|---|
| Japan dysprosium imports | 13 metric tons | Down 82% versus first half of 2024 |
| Months with zero dysprosium imports | 4 | January, February, May and June |
| Japan yttrium imports | About 204 metric tons | Down 74% versus first half of 2024 |
| Chinese dysprosium and terbium exports to Japan | Zero reported | Cutoff extended through the first half of 2026 |
| Japanese manufacturers’ secured rare-earth supply | About two-thirds of requirements | Shortfall could persist into 2027 |
Sources: Caixin citing Argus; Nikkei data summarized by TrendForce.
Yttrium imports also fell sharply, declining 74% to about 204 metric tons in the first half of 2026. Japan sourced yttrium from 12 countries and regions outside China during the period, but those sources have not yet supplied enough material to fully offset the reduction in Chinese shipments.
EV magnets face the most direct pressure
Dysprosium and terbium are used in high-performance neodymium-iron-boron, or NdFeB, permanent magnets. Small additions of the heavy rare earths improve coercivity, allowing magnets to withstand high temperatures and resist demagnetization.
That property is especially important in compact electric-vehicle traction motors, where heat, sustained torque and limited space place demanding requirements on the magnet system.
Automakers and suppliers have been working to reduce the quantity of dysprosium and terbium required in each magnet. One approach is grain-boundary diffusion, which concentrates the heavy rare earth near the surface and boundaries of the magnet rather than distributing it throughout the material. This can reduce consumption while maintaining the required thermal performance.
Other manufacturers are testing motor designs that use less or no heavy rare earths. Those alternatives include induction motors, ferrite-based systems and revised permanent-magnet designs. However, the transition is not immediate. Existing vehicle platforms, production lines and qualification standards continue to rely heavily on established NdFeB magnet technologies.
Terbium can provide a stronger coercivity effect than dysprosium in some magnet grades, but it is also more expensive and less readily available. Manufacturers therefore balance performance, price and material availability when determining the mix used in a magnet.
The supply problem is compounded by the limited size of non-Chinese production. Reuters has reported that Lynas produced only about 8 metric tons of dysprosium and terbium combined in the first quarter of 2026, compared with historical Chinese shipments to Japan of roughly 14 metric tons per month for the two materials in 2024.
That gap illustrates why new mines and separation plants will not immediately solve the problem. Even where ore is available, producers must still build separation, refining, metal-making and alloy capacity, then qualify the material with magnet and automotive customers.
High-performance rare-earth magnets are used in compact traction motors for electric and hybrid vehicles.
Chip tools feel a different part of the squeeze
The impact on semiconductor manufacturing equipment is more indirect than the effect on EV motors.
Nikkei’s reporting links the Japanese chip-tool supply chain primarily to yttrium oxide. The material is used in coatings for components exposed to high temperatures and corrosive plasma environments inside some etching and deposition equipment.
These coatings help protect components and extend their operating life. A shortage can therefore affect the availability of specialized parts even when the quantity of rare earth used in each component is relatively small.
Japanese materials suppliers have begun looking for alternative sources and materials. TrendForce reported that Mitsui Kinzoku had planned to manufacture rare-earth materials for semiconductor equipment in Fukuoka using yttrium feedstock from China, but insufficient supplies have limited the company’s ability to export.
AGC, which uses yttrium in coatings for chipmaking equipment components, had not reported major production disruptions in the cited coverage. The company was nevertheless examining materials from outside China as inventories came under pressure.
For now, Japan’s semiconductor equipment industry appears to be managing the disruption through stockpiles, alternative procurement and engineering adjustments. The immediate effect is a supply-chain squeeze rather than a broad production halt.
That distinction matters. Semiconductor tools typically involve lengthy qualification cycles, and replacing a coating material or component may require testing for contamination, durability and process performance. If inventories continue to decline, companies could face a longer lead time before substitute materials are approved.
Yttrium-based coatings help protect components used in high-temperature semiconductor manufacturing processes.
Diversification will take time
Japan has been pursuing supply diversification since a previous rare-earth dispute with China exposed the risks of concentrated sourcing. The current disruption is accelerating efforts to develop non-Chinese mining, separation, recycling and magnet-making capacity.
The country is also pursuing additional partnerships overseas and considering deeper use of recycled materials. Japanese manufacturers have experience with material efficiency, including magnet designs that reduce heavy rare-earth content. Those measures can lower demand, but they cannot immediately replace a sustained loss of imported feedstock.
The first-half data also indicate that inventory management is becoming central to the response. Companies may continue serving customers for a period by drawing down stockpiles, but that can conceal the severity of the underlying supply gap until inventories reach critical levels.
The timing of new supply remains the central issue. Caixin’s report said JOGMEC-backed projects could take one to two years to reach large-scale output. That supports the expectation that shortages could continue through 2026 and into 2027, even if some alternative shipments begin earlier.
Japan is expanding alternative sourcing and processing links, but new capacity will take time to scale.
A test of industrial resilience
The immediate consequences will vary by sector. EV and hybrid motor supply chains face direct exposure to dysprosium and terbium availability, while semiconductor equipment makers are more closely tied to yttrium oxide and other specialized materials.
Neither sector has yet reported a universal production stoppage based on the available reporting. But the combination of zero reported Chinese shipments, sharply reduced Japanese imports and limited alternative output leaves little room for extended disruption.
For operators and policymakers, the key indicators will be whether Chinese export approvals resume, whether non-Chinese producers can increase separated heavy rare-earth output, and how quickly Japanese manufacturers qualify substitutes.
The situation also highlights a broader feature of critical-mineral supply chains: reducing dependence on one country requires more than opening a mine. Refining, metal production, alloying, component manufacturing and customer qualification must all be developed together.
Japan’s response will therefore be measured not only by the volume of new rare earths it secures, but also by how efficiently its manufacturers can use, recycle or replace dysprosium, terbium and yttrium.
Until that wider chain is in place, the reported halt in Chinese supply leaves Japanese industry facing a heavy rare-earth shortage that may extend well beyond 2026.
Sources: Caixin Global; Nikkei reporting; TrendForce; Skillings rare-earths coverage.