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China’s latest export restrictions on rare earth minerals could cause a closure of automobile production, and within months, when Beijing suffocated its exports completely, it lost its essential magnet stockpile.
Beijing extended export restrictions to seven rare earth elements and magnets essential for electric vehicles, wind turbines and fighter jets in early April in retaliation over Chinese President Donald Trump’s steep tariffs.
Government officials, traders and automotive executives said that as stocks are estimated to last three to six months, companies will compete to stock up more material and find alternatives to avoid major disruption.
Jan Guys, a metal trader at Frankfurt-based Treaddium, warned that customers were caught off guard and that most auto groups and their suppliers only seem to have two to three months’ worth of magnets.
“If we don’t see magnet delivery to the EU or Japan at the time, or at least that close, then, we’ll see a real problem with the car supply chain,” says Giese.
China’s latest controls focus on “heavy” and “medium” rare earths that allow for high-performance magnets that can withstand higher temperatures such as dysprosium, terbium and samarium. These are essential for military applications such as rotors, motors, and transmissions, which are highly distinctive in jets, missiles, drones, and electric and hybrid vehicles.
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Senior automobile executives said critical mineral restrictions would be “consequential” for Tesla and all other automakers, explaining export restrictions as “7 or 8” on a scale of 1-10 in terms of severity.
“It’s a form of retaliation where the Chinese government can say, ‘OK, we’re not going to make any further adjustments on the tariff rates, but we’ll hurt you and we’ll encourage your own home government to sue you to change the tariff policy,” he said.
Rare earth metals are common in the Earth’s crust, but are difficult to extract in a low-cost, environmentally friendly way, and China has a largely monopoly on heavy rare earth processing.
Rare earths of “light” such as neodymium and praseodymium are used in large quantities of magnets, which gives Beijing a “big threat vector” to expand control in the event of a trade war intensifies, Cory Combs of Beijing-based tribium said.
Beijing administrators have requested exporters to obtain licenses for each cargo of overseas materials, expanding the scope to ban re-exports in the United States. However, in response to the US bloc on access to China’s chip technology, curb application, which has covered a gradually expanding group of key minerals since 2023, has been far from universal.
Chinese exporters have already declared their military forces on rare earth and magnet cargoes heading overseas, withdrawing materials sold from the market, further obscuring prices for already opaque goods.
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Japan and other countries plan to expand Malaysia’s processing sites by mid-2025 to produce dysprodium and terbium.
“Heavy rare earth stockpile elements are not sufficient to avoid potential turbulence in the automobile supply chain,” he added that national stockpile should provide extra relief beyond the two to three months of supply held by car manufacturers.
“The question is whether stockpiles can create new alternative supply chains in time to survive this,” he added.
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It is not yet clear from the Chinese government’s announcement since April 2, and how Beijing plans to implement its latest export restrictions.
Analysts say China will have export controls as China faces raw materials that will decay heavy rare earth materials due to the civil war in Myanmar.
Experts have said in recent years that China has been reluctant to block shipments that undermine economic benefits such as gallium, but cargo has been in the midst of massive amounts, including other metals such as antimony, which are used to make bullets.
“The key question is how long it takes to process an export license,” Giese said.
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