Chokepoint: the Financial Effects of Rare Earth Supply Disruptions

Joshua Ostry ()
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Joshua Ostry: Geneva Graduate Institute and CEPR

No 10-2026, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: This paper constructs a high-frequency, news-based measure of rare earth supply shocks to examine how disruptions in these critical inputs affect global firm valuations. Using news articles between 2021 and 2025, I identify exogenous rare earth supply events, distinguishing between Chinese trade-restriction and global production shocks. Using a sample of 5800 public firms, I show that negative rare earth supply shocks, which are expected to raise input prices, cause significant and persistent declines in the equity prices of rare earth-exposed firms, especially those in the battery, semiconductor, and motor vehicle industries. Both trade and production shocks depress valuations, though trade restrictions shocks are particularly impactful. These findings highlight a financial channel through which the weaponization of critical-material supply chains transmits across global markets.

Keywords: Rare earth elements; critical minerals; supply chains; supply shocks; large language models; geoeconomics; financial markets (search for similar items in EconPapers)
JEL-codes: F14 F51 G14 Q02 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2026-04-09
New Economics Papers: this item is included in nep-bec, nep-ene, nep-ifn and nep-min
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Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heidwp10-2026

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