Exclusive: Rare Earth Shortages Worsen in US Aerospace, Chips Despite Trade Truce, Sources Say

 

# Exclusive: Rare Earth Shortages Worsen in US Aerospace, Chips Despite Trade Truce, Sources Say

**Published: February 26, 2026**

You know how sometimes a truce is declared, but the fighting doesn't really stop?

That's exactly what's happening right now in the hidden war over rare earth minerals.

Despite the much-publicized trade detente between President Trump and China's President Xi last October, American aerospace and semiconductor companies are facing worsening shortages of two critical materials: **yttrium and scandium** .

According to exclusive reporting from Reuters, suppliers to these industries are now turning away customers, pausing production, and rationing what little material they have . And with Trump scheduled to meet Xi in Beijing next month, this issue is about to take center stage.

Let me walk you through what's happening, why it matters for everything from jet engines to your iPhone, and what it means for American industry.

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## The Short Version

**What's happening:** Despite a trade truce between the U.S. and China, shortages of rare earth elements yttrium and scandium are getting worse for American aerospace and semiconductor companies .

**The numbers:** Yttrium prices have jumped 60% since November and are now **69 times higher than a year ago** . China exported just 17 tons of yttrium products to the U.S. in the eight months after export controls were introduced—compared to 333 tons in the eight months before .

**The impact:** At least two North American suppliers have started turning away customers. One company has paused production entirely. Another has run out of material and stopped selling products containing yttrium oxide .

**The stakes:** Yttrium is used in coatings that prevent jet engine turbines from melting at high temperatures. Without it, engines can't operate. Scandium is critical for next-generation 5G chips and advanced aerospace alloys .

**The politics:** President Trump is scheduled to meet with President Xi in Beijing next month, and this issue will be high on the agenda .

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## The Two Minerals at the Center of the Crisis

Let's start with the basics: what exactly are yttrium and scandium, and why should you care?

**Table 1: The Critical Minerals in Short Supply**

| **Mineral** | **What It's Used For** | **Why It Matters** |

| :--- | :--- | :--- |

| Yttrium | Coatings that protect jet engine turbines from extreme heat | Without it, engines can't operate safely |

| Yttrium | Thermal barrier coatings in industrial gas turbines | Critical for power generation |

| Scandium | Advanced chip components for 5G smartphones and base stations | Every 5G device relies on it |

| Scandium | Aerospace aluminum alloys | Makes metals lighter and stronger |

| Scandium | Fuel cells and solid oxide fuel cells | Clean energy applications |

Both minerals are what experts call "niche members of the family of 17 elements" . They play tiny but vital roles. And here's the kicker: **they are almost entirely produced in China** .

**Kevin Michaels**, managing director of AeroDynamic Advisory, put it bluntly: "This is a watch item and a tangible example of how China is flexing its rare earth muscle" .

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## The Yttrium Crisis: Jet Engines at Risk

Let's focus on yttrium first, because this is where the immediate pain is most acute.

**What yttrium does:** It's used in thermal barrier coatings that keep engine and turbine components from melting at extreme temperatures. Think of it as a super-powered sunscreen for metal parts operating at thousands of degrees .

**The consequence of shortage:** "Without regular application of these coatings, engines cannot be used" .

**The price explosion:** Since Reuters first reported on yttrium shortages in November, prices have jumped 60% . But that doesn't capture the full story. Compared to a year ago, yttrium prices are now **69 times higher** .

**The export numbers tell the story:**

**Table 2: Yttrium Exports to U.S. Before and After Controls**

| **Period** | **Yttrium Products Exported to U.S.** |

| :--- | :--- |

| 8 months before April 2025 controls | 333 tons |

| 8 months after controls (through February 2026) | 17 tons |

| **Decline** | **95%** |

*Source: Chinese customs data via Reuters *

**The real-world impact:**

- Executives at two North American companies that buy yttrium to make coatings told Reuters they've needed to **temporarily pause production** due to shortages .

- One of those companies is now **turning away smaller and offshore customers** in order to conserve supply for larger clients, including certain engine makers .

- Another firm in the coating supply chain recently **ran out of material entirely** and stopped selling products containing yttrium oxide .

**The production pressure:** While low yttrium supplies haven't yet halted engine production, manufacturers are deeply concerned. Engine makers are already struggling to meet demand for spare parts from airlines and higher production targets from Boeing and Airbus .

**The companies affected:** Major U.S. aircraft engine makers—GE Aerospace, RTX's Pratt & Whitney, and Honeywell—all declined to comment .

---

## The Scandium Crisis: 5G Chips in the Crosshairs

If yttrium threatens jet engines, scandium threatens your smartphone.

**What scandium does:** It's used in advanced chip processing and packaging, specifically in components that go into "essentially every 5G smartphone and base station" .

**The global supply:** Worldwide production is only **several tens of tons per year** . And the U.S. currently has "zero domestic scandium production and no operational alternative sources outside China" .

**The timeline:** Existing stockpiles are likely measured in "months rather than years" .

**The targeting theory:** U.S. chipmakers have experienced delays in receiving new scandium export licenses from China in recent months and have reached out to Washington for help . A U.S. official told Reuters: "Our thesis is that it is precisely the semi industry being targeted" .

**Dylan Patel**, founder and CEO of research firm SemiAnalysis, warned that dwindling scandium supplies are putting "production of next-generation 5G chips at risk" .

**The implications:** If scandium runs out, it doesn't just affect one company—it affects every 5G device manufacturer that relies on those chips.

---

## The Trade Truce That Wasn't

Here's the frustrating part for American companies: this is happening **despite** a trade truce.

**What was supposed to happen:** In October 2025, Presidents Trump and Xi agreed to a trade detente. Part of that deal was premised on China pausing its critical mineral export restrictions .

**What actually happened:** While Beijing has allowed many rare earth exports to resume, shipments of yttrium and scandium "still rarely make it to the U.S." .

**The data:** China exported just 17 tons of yttrium products to the U.S. in the eight months after controls were introduced—a 95% drop from the previous eight months .

**The official response:** A White House official said the Trump administration is committed to ensuring access to critical minerals for all U.S. businesses. "This includes negotiating with China and monitoring compliance with President Trump's agreement with President Xi, as well as developing alternative supply chains as warranted" .

**The upcoming summit:** Trump is scheduled to meet with Xi in Beijing in March, and this issue will be on the table .

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## The Broader Context: America's Rare Earth Problem

To understand why this is happening, you need to understand America's decades-long vulnerability.

**How we got here:** As Michael Cadenazzi, Assistant Secretary of War for Industrial Base Policy, put it: "We basically ceded our rare earth production capability to China in the 1990s. We stopped investing in that capability. So, we've missed two generations of scientists and capabilities" .

**The current reality:**

**Table 3: U.S. Rare Earth Dependence on China**

| **Category** | **China's Share** |

| :--- | :--- |

| Global rare earth reserves | ~60% |

| Global refined production | ~90% |

| Global heavy rare earth permanent magnets | 94% |

*Sources: *

**The investment response:** The U.S. is trying to catch up. Recent initiatives include:

- **The "Vault Program":** A $10 billion strategic mineral储备 program funded by the Export-Import Bank, plus nearly $2 billion in private investment .

- **MP Materials investment:** The Defense Department invested $400 million in the U.S. rare earth producer, acquiring a 15% stake to fund a new magnet factory .

- **ReElement Technologies:** A $2 million Department of War investment in an Indiana company working on rare earth purification .

But as one independent analyst noted: "This is not something that can be solved in five years. Rebuilding a system will take more than 10 years" .

**The timeline problem:** A mine takes an average of **16 years** from discovery to operation . Lengthy approval processes, strict environmental regulations, and volatile prices all deter investment .

**The "Vault" criticism:** Even the much-touted储备 program has limitations. Wood Mackenzie estimates that if scaled proportionally for 44 critical minerals, the "Vault" would only cover **45 days of demand** .

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## What This Means for You

### If You're in Aerospace or Defense

This is an immediate concern. Yttrium shortages are already affecting coating manufacturers, and engine production could be next. If you're in the supply chain, start conversations with alternative suppliers now—even if they're more expensive. A stable source at a higher price is better than no source at all.

 If You're in Semiconductors

Scandium is your ticking clock. With stockpiles measured in months rather than years, this needs to be a board-level discussion. The U.S. has no domestic production and no alternative sources outside China. Diversification isn't optional—it's existential.

### If You're an Investor

This situation creates both risks and opportunities.

**Risks:**

- Companies heavily dependent on yttrium or scandium face production disruptions

- Margins will compress as prices rise 69x

- Supply chain uncertainty could delay product launches

**Opportunities:**

- Companies developing alternative sources (recycling, domestic mining, international partnerships)

- Advanced materials companies working on substitutes

- Defense contractors with优先 access to government stockpiles

### If You're Just a Consumer

You might not feel this immediately, but eventually it trickles down. Jet engine delays mean fewer flights or older planes staying in service longer. Chip shortages mean phone prices could rise or new models get delayed.

The bigger picture: this is a reminder that the things we take for granted—reliable air travel, the latest smartphone—depend on fragile global supply chains.

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## Frequently Asked Questions

**Q: What exactly is a rare earth element?**

A: Rare earth elements are a group of 17 metallic elements that are actually not that rare in the earth's crust—but they're difficult to extract and process. They're essential for modern technology because of their unique magnetic, phosphorescent, and catalytic properties .

**Q: Why does China dominate rare earth production?**

A: It's a combination of geology and industrial policy. China has significant deposits, but more importantly, it invested heavily in processing capabilities over the past three decades while other countries let their industries atrophy. Today, China controls about 90% of global refined production .

**Q: Can't the U.S. just mine its own rare earths?**

A: It's trying. The U.S. has deposits, but building mines and processing facilities takes years—often a decade or more. The U.S. also lacks the specialized workforce and technology for efficient, environmentally sound processing .

**Q: What's being done about the shortage?**

A: Several things: 1) The U.S. is negotiating with China, 2) Building a strategic储备, 3) Investing in domestic producers, 4) Working with allies to develop alternative supply chains .

**Q: How long will this shortage last?**

A: Analysts expect it to persist for years. One independent analyst said rebuilding a rare earth supply chain "will take more than 10 years" .

**Q: Will this affect airplane travel?**

A: Not immediately, but if shortages persist and engine production is impacted, it could eventually affect airline capacity and ticket prices.

**Q: Will my next phone cost more because of this?**

A: Possibly. Scandium is used in 5G chips, and shortages could increase costs for semiconductor manufacturers, which could get passed down to consumers.

**Q: What's the deal with the Trump-Xi meeting?**

A: Trump is scheduled to visit Beijing in March, and rare earth exports will be a major topic of discussion. The U.S. wants China to honor the trade truce and restore normal shipments .

**Q: Are there alternatives to these minerals?**

A: Research into substitutes is ongoing, but for many applications—especially in aerospace—the unique properties of these elements are difficult to replicate.

**Q: How bad is this compared to other supply chain issues?**

A: This is different from the pandemic-era chip shortage. That was about demand spikes. This is about deliberate supply restriction of materials with no alternatives. Strategically, it's more concerning.

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## The Bottom Line

Here's what I keep coming back to.

A trade truce was supposed to ease tensions. Instead, American companies are facing worse shortages than before.

Yttrium prices are 69 times higher than a year ago. Companies are turning away customers, pausing production, running out of material. Engine makers are worried. Chipmakers are running low on stockpiles measured in months, not years.

**Kevin Michaels** called it "a tangible example of how China is flexing its rare earth muscle." **Dylan Patel** warned that 5G chip production is at risk. **A U.S. official** said the semiconductor industry appears to be specifically targeted.

The U.S. is spending billions to catch up—investing in domestic producers, building a strategic储备, working with allies. But as one analyst put it: "This is not something that can be solved in five years."

For now, American industry is left to scramble. Rationing material. Turning away customers. Hoping the next shipment arrives before the stockpile runs out.

And waiting for a summit in Beijing that might—or might not—change anything.