CITIC SECURITIES has released a research report stating that China's strengthened controls on rare earth exports have led to shortages and significant price increases for certain rare earth oxides overseas. Since the production of advanced ceramics relies on these oxides, the report suggests that Japanese and American manufacturers, who have historically dominated the high-end ceramics market, now face risks related to rising raw material costs and potential supply disruptions. CITIC SECURITIES believes this evolving situation is favorable for Chinese high-end ceramic manufacturers, who are expected to accelerate their global expansion and gain market share, entering a period of historic opportunity. The firm highlights platform companies in the high-end ceramics sector and the leading Chinese manufacturer of dental zirconia, while also recommending attention to other high-end ceramic producers with export capabilities. The main points of CITIC SECURITIES' report are as follows.
The shortage and rising prices of rare earths overseas directly benefit domestic manufacturers of related downstream products. Since 2025, China has continuously tightened restrictions on rare earth exports, leading to a sharp decline in the export volume of certain rare earth oxides. Customs data shows that the combined export volume of yttrium oxide, dysprosium oxide, terbium oxide, and praseodymium oxide from January to February 2026 decreased by 93.8% year-on-year. Considering that China accounts for 70% of global rare earth production (USGS data), the reduction in exports has caused shortages and substantial price hikes for some rare earth oxides abroad. The firm believes the continuation of this trend directly benefits domestic downstream product manufacturers, as their overseas competitors grapple with increased material costs and supply risks, potentially enhancing the market share and profitability of Chinese firms.
The production of advanced ceramics is inseparable from rare earth oxides. In ceramic materials, rare earth oxides are primarily used as additives to improve sintering properties, density, microstructure, and crystalline phase composition. This significantly enhances the mechanical, electrical, optical, or thermal performance of the ceramics. Whether considering material types—such as aluminum oxide, zirconium oxide, aluminum nitride, silicon nitride, and silicon carbide—or downstream applications—including dental zirconia, MLCC powders, ceramic substrates, and ceramic balls—rare earth oxides have become essential additives in advanced ceramic manufacturing.
The report is optimistic about a historical period of accelerated import substitution for high-end ceramics. Firstly, in dental zirconia: according to QY Research and internal calculations, the global market size for zirconia blocks/powders used in all-ceramic dentures was 4.64 billion/1.30 billion yuan in 2025, with Japanese manufacturers holding over 50% market share in the powder segment. Given the high proportion of yttrium oxide in dental zirconia powder and the substantial price increases for yttrium oxide overseas, a logic of shortage and price hikes has already emerged for dental zirconia. Secondly, for MLCC powders: the global market size for MLCC ceramic powder was 19.3 billion yuan in 2025, with Japanese and American manufacturers collectively holding over 80% share in the specialized formula powder market. Thirdly, regarding ceramic substrates: the global market size for HTCC ceramic packages & substrates/metallized ceramic substrates was 2.87 billion/1.78 billion USD in 2025. Japanese manufacturers hold nearly 70% of the global HTCC market, while the upstream supply of ceramic blanks for metallized substrates is primarily dominated by Japanese companies. Lastly, for ceramic balls: the global market size for silicon nitride ceramic balls was approximately 1.8 billion yuan in 2025, with Japanese and American manufacturers holding significant market share. Japan's Ube Industries is one of the few companies capable of producing silicon nitride powder using a liquid-phase reaction method.
In summary, while Japanese and American manufacturers dominate the global high-end ceramics market, some Chinese companies have already established a degree of competitiveness. The report concludes that against the backdrop of restricted access to rare earth oxides for Japanese and American firms, Chinese high-end ceramic manufacturers are poised to accelerate their overseas market expansion and capture market share, heralding a historic opportunity period.
Risk factors include potential changes in rare earth control policies, fluctuations in raw material prices, currency exchange rate volatility, macroeconomic downturns, and risks associated with technological change.
Investment strategy focuses on recommending platform companies in the high-end ceramics sector and the leading Chinese dental zirconia manufacturer, while also suggesting attention to other high-end ceramic producers with export capabilities.
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