China makes agreement with US on magnets

GLOOM in the US automotive manufacturing sector precipitated first by the Trump administration’s tariffs – and followed by China’s retaliatory restriction of rare earth elements including neodymium (magnets) – may be de-escalating, following the signing of an agreement between the two countries late last month.

The agreement allows for a (partial) resumption of “magnet” shipments to US companies that have previously received them on a regular basis, and will be expedited according to a statement from the US Treasury.

The agreement prompted US Treasury secretary Scott Bessent to say, “I am confident now ... the magnets will flow, this is a de-escalation”.

According to publication Automotive News China, magnet restrictions had the potential of mass shutdowns across the automotive supply chain, but the threat is fading as Chinese rare earth magnets begin to flow; though automakers and suppliers say production plans still face uncertainties and a continued risk of shortages.

“European suppliers have received enough licenses to avoid the widespread disruptions predicted earlier this month, but hundreds of permits remain pending,” said European automotive supplier association CLEPA head of market affairs Nils Poel.

“The rate of issuance is accelerating, and has risen to 60 per cent from 25 per cent, but cases where the end users are based in the United States, or where products move through third (party) countries like India, are taking longer or not being prioritised.

“Overall, the feeling is that we probably will still have production in July and that the impact will be manageable. Maybe here and there a production line will be affected, but we have avoided that for the moment.”

Ironically, the effects of tariff-induced rare earth restrictions were felt keenly in the US with Ford CEO Jim Farley saying he had to shut down factories over the past three weeks because of magnet shortages.

In Europe, however, it appears sufficient supplies of rare earths is flowing with Volkswagen, for example, saying in a statement to Reuters that its supply of rare earth components was stable.

Rival Stellantis said it had addressed its immediate production concerns.

China restricted exports of seven rare earths and related magnets in April in retaliation for US tariffs, but three months later there remains huge uncertainty about how it intends to police its opaque and complex export licensing system.

“Since the restrictions were imposed, rare earth magnet exports from China have fallen roughly 75 per cent, forcing some automaker production lines to halt in Asia, Europe and the United States,” said Reuters.

US manufacturers who use neodymium and other rare earths from China report a trickle of import licenses delayed by up to 45 days in application paperwork then a continuation of the “go slow”, leading to a further 45 days until the licenses are granted.

China now demands all exports of rare earth elements require a license from China's Ministry of Commerce (MOFCOM), under the country’s Export Control Law.

Shipments lacking proper licences or documentation may be held or denied at customs.

To recap, in April China placed export restrictions on seven strategically chosen rare earths and the end-product, magnets.

The new restrictions apply to seven of 17 rare earth elements – samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium – and requires companies to secure special export licenses to export the minerals and magnets.

The country has the world’s largest known reserves of rare earth minerals, holding an estimated 44 million metric tonnes, or approximately 37 per cent of global reserves.

Australia also has significant reserves and production of rare earth minerals and is a key player in the rare earths market.