With a near monopoly on the output of rare earth elements, Beijing is using them as a key weapon in its trade war with Washington.
China’s restrictions
As the trade war with the United States has developed, Beijing has required Chinese companies since April to obtain a licence before exporting these materials -- including rare earth magnets -- to any country.
“Since early April, hundreds of export licence applications have been submitted to Chinese authorities, yet only approximately one-quarter appear to have been approved,“ the European Association of Automotive Suppliers (CLEPA) said Wednesday.
And US Treasury Secretary Scott Bessent this month said Beijing was “blocking certain products it had agreed to market as part of our agreement”.
Few alternatives
Two of them -- neodymium and dysprosium -- are crucial to making powerful magnets for electric vehicles and wind turbines.
China’s restrictions highlight the world’s heavy dependency, with Europe importing 98 percent of its rare earth magnets from the country, BMI said.
Industry group CLEPA added that efforts undertaken in Europe to diversify supply sources “offer no short-term solutions and cannot address the acute risks currently facing supply chains”.
The auto industry is already suffering globally.
The group on Tuesday reported “significant disruptions” in Europe, where these restrictions “have led to the shutdown of several production lines and plants”. It warned that “further impacts (were) expected in the coming weeks as inventories deplete”.
“If the situation does not evolve quickly, production delays, or even production losses, can no longer be ruled out.”
And US auto giant Ford had to halt production for a week in May at its Chicago plant making the Explorer SUV because of shortages, according to Bloomberg.
Indian scooter-maker Bajaj Auto recently warned the restrictions could impact its production in July.
“Statements (by German companies) indicating that stocks will only suffice through the end of June should certainly be taken seriously.”
“Concern is visibly growing, many companies currently have resources only for a few weeks or months,“ said Wolfgang Weber, president of Germany’s electronics industry association ZVEI.
While uncertainty remains, talks between US President Donald Trump and Chinese counterpart Xi Jinping on Thursday seem to have paved the way for a potential easing by Beijing.
A rapid resolution of the China-US row remains unlikely but reports indicate “an agreement was reached to overcome immediate obstacles, particularly concerning critical minerals”, noted Wendy Cutler, vice president of the Asia Society Policy Institute.
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