China loosens grip on magnet exports, relieving carmakers
Beijing’s control of rare-earth minerals gives it leverage over U.S. during trade tensions.
China has begun to resume allowing exports of rare-earth magnets after the process ground to a halt for a few weeks, offering some relief for automakers and electronics companies that need the components.
An April 4 measure by Beijing said the export of certain rare-earth materials and devices containing them would require a license. Coming during a tit-for-tat trade war between the U.S. and China, the measure was among the most worrisome aspects of the conflict for Western automakers.
Rare-earth magnets are essential for electric-vehicle motors and certain other products, and China has a near-monopoly on rare earths production. It mines around two-thirds of global rare-earth minerals and processes about 90% of the world’s supply.
After weeks of uncertainty in which some in the industry feared a total cutoff in supplies, some companies have begun receiving export licenses.
A representative for one Chinese magnet maker said a few companies have received one or two export licenses with more expected in coming weeks. A Chinese auto component supplier in Shanghai shared a similar experience, saying the regulator in charge, China’s Ministry of Commerce, recently granted licenses to two batches of magnet components to German companies.
A representative of Volkswagen said it has received indications that its subcontractors have obtained a limited number of export licenses. Two people in the rare-earths industry said U.S. companies have also begun receiving licenses.
People in the industry cautioned that the process isn’t back to normal yet and lack of clarity remains about the regulator’s intentions. Defense-related companies have come under particular scrutiny. Any lengthy delays in license applications could upset production plans, and Beijing holds the cards.
“It’s basically like a tap. They can decide when to export and when to not, and the control is in their hands, completely," said Neha Mukherjee, a rare-earths analyst at Benchmark Mineral Intelligence.
Beijing’s April 4 controls require government approval for export of magnets including those containing a particular subset of rare earths, known as heavy rare earths, that can have military applications.
The move came during one of the most heated periods of the U.S.-China trade conflict, but it wasn’t styled as retaliation against President Trump’s additional tariffs announced two days earlier. The controls target exports to any country, not just the U.S.
The reason for the recent granting of export licenses couldn’t be determined. While the U.S. and China agreed to a trade-war truce on Monday, people in the industry said the break in the logjam might simply reflect that regulators have now had seven weeks to review applications. Beijing had said that it would review requests within 45 working days.
“You cannot even begin to imagine the flood of applications they must have had," said Thomas Kruemmer, a rare-earths analyst based in Singapore.
Magnets containing rare-earth elements such as dysprosium and terbium are considered highly strategic. They are used in everything from F-35 jet fighters and missile systems to iPhones and electric vehicles.
Over several decades, China has built the world’s largest rare-earth magnet industry, giving American manufacturers few alternatives but to source from China and handing Beijing a useful weapon to brandish during times of conflict. U.S. companies such as General Motors have signed deals to buy from new magnet plants being built in the U.S., but large-scale U.S. production is still months to years away.
Over the past month, automakers and their suppliers have been hurrying to figure out which components use rare-earth elements. Some automakers found that dozens of components they use contain the rare earths, often in the form of permanent magnets, people in the industry said.
Tesla Chief Executive Elon Musk said on an earnings call last month that lack of the magnets could interfere with plans to build the Optimus humanoid robot.
“Hopefully, we’ll get a license to use the rare-earth magnets," Musk said. “China wants some assurances that these are not used for military purposes, which obviously they’re not."
Write to Jon Emont at jonathan.emont@wsj.com and Raffaele Huang at raffaele.huang@wsj.com
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