Japan: Rare Earth-Related Stocks in Focus: Shin-Etsu Chemical, Daido Steel, Sojitz
U.S. rare earth-related stocks surged across the board
On October 13, 2025, U.S. rare earth-related stocks surged across the board following China’s move to tighten export controls on rare earth elements and a warning from President Trump threatening 100% tariffs on Chinese goods. For instance, shares of Critical Metals jumped more than 55%, MP Materials rose by 21%, and NioCorp Developments gained nearly 9%.
Rare earth elements, such as neodymium (Nd)—a critical raw material for neodymium magnets—are indispensable for electric vehicles (EVs), wind turbines, and military technologies, positioning them at the forefront of geopolitical risk. In Japan, neodymium magnet-related stocks and companies involved in recycling for a circular economy are emerging as sectors of immediate interest.
Key Japanese Stocks to Watch
Shin-Etsu Chemical (4063): Countering Geopolitical Risk through Vertical Integration and Technology
Shin-Etsu is the world’s top supplier of rare earth magnets, boasting a vertically integrated business model that spans everything from rare earth separation and purification to the manufacturing of neodymium magnets.
Competitive Advantages:
The performance of neodymium magnets heavily relies on heavy rare earths like dysprosium (Dy) and terbium (Tb), which are predominantly sourced from China.
Shin-Etsu has commercialized a “grain boundary diffusion method” that significantly reduces the use of Dy and Tb—by up to 50%.
This rare-earth-saving technology offers a decisive defense against rising geopolitical risk, increasing in strategic value as China tightens export restrictions.
The company’s electronics materials division (which includes magnets) maintains high profit margins. Despite fluctuations in raw material prices, its pricing power driven by technical superiority ensures a stable and profitable business.
Daido Steel (5471): The Game-Changer in Heavy Rare Earth-Free Magnets
Daido Electronics, a subsidiary of Daido Steel, was the first in the world to mass-produce hot-deformed neodymium magnets that completely eliminate the need for Dy or Tb.
Innovative Technology:
Co-developed with Honda, this magnet maintains high-temperature performance without using heavy rare earths—a breakthrough with the potential to revolutionize EV and hybrid motor design and neutralize the risk of Chinese supply cuts.
Market Impact:
Wider adoption of Dy-free magnets could radically reshape the heavy rare earth market, currently dominated by China.
Sojitz (2768): Building a Non-China Rare Earth Supply Chain
As a general trading company, Sojitz plays a central role—alongside JOGMEC (Japan Oil, Gas and Metals National Corporation)—in establishing a non-Chinese rare earth supply network.
Securing Supply:
Sojitz holds a stake in Lynas Rare Earths, a major Australian producer, and has secured exclusive sales rights in Japan for heavy rare earths (Dy and Tb) from its Mt. Weld mine.
Strategic Importance:
As U.S.-China tensions escalate, global efforts to reduce dependence on China are accelerating. The supply route secured through Lynas is a vital lifeline for Japan, growing in value as geopolitical risk premiums rise.
Estimating the Rare Earth Price Shock
During the 2010 “Rare Earth Shock”, the price of dysprosium (Dy)—which determines the performance of neodymium magnets—skyrocketed by over 100 times in just a few years.
Trump’s threat of 100% tariffs on Chinese goods recalls this historical surge and highlights the extreme risk of soaring Dy procurement costs if the supply chain is disrupted.
Cost Breakdown of Neodymium Magnets (Estimated):
In high-performance neodymium magnets used for motors, heavy rare earths like Dy and Tb are estimated to account for 20%–40% of total production costs.
If Chinese export restrictions push prices up fivefold, raw material costs for standard high-performance magnets could spike by over 50%, dealing a severe blow to EV and wind turbine manufacturers.
Conclusion
In this context, companies with technologies that reduce or eliminate reliance on heavy rare earths—like Shin-Etsu Chemical and Daido Steel—and those securing alternative supply chains—like Sojitz—are likely to attract significant attention in the medium term.