【Text by Observers Network, Xiong Chaoran】According to data released by the General Administration of Customs on September 20, in August this year, China's exports of rare earth magnets to the EU increased by 21% month-on-month, reaching 2,582 tons. The cumulative exports from the beginning of this year have exceeded three times the amount exported to the United States. By comparison, China's exports of rare earth magnets to the United States decreased by 5% month-on-month, to 590 tons.
Bloomberg reported on September 21 local time that last month, China's exports of rare earth magnets to the EU surged, highlighting the higher dependence of the EU on China's supply than the United States. At the same time, the report claimed that the EU's excessive reliance on Chinese rare earths makes its industries particularly vulnerable and puts it in a fragile position amid the Sino-US trade tensions.
Even as recent supply has rebounded, the earlier supply shortages have still caused chain reactions throughout the EU. On September 18, the China-EU Chamber of Commerce stated that EU companies experienced seven production interruptions in August this year, with an expected additional 46 shutdowns this month.
The report said that China's dominant position in the rare earth sector has prompted Europe to accelerate its plans to find alternative sources. The EU's "Critical Raw Materials Act" came into effect last year, including proposals to recover more rare earth elements from electronic waste. In addition, the European electric vehicle industry is seeking rare earth supply sources in places like Estonia. In the United States, the only rare earth miner, MP Materials, plans to start commercial production of rare earth magnets later this year.
Rare Earth Magnets, Illustration
Previously, according to a report by Reuters on September 16 local time, the China-EU Chamber of Commerce stated that China continues to strictly control rare earth exports, and European companies are expected to face more shutdowns and suffer losses.
Jens Eskelund, Chairman of the China-EU Chamber of Commerce, told reporters that regardless of previous agreements and commitments between China and the EU, the chamber's member companies are still facing serious supply bottlenecks. He "complained" that out of about 140 export license applications submitted by the chamber, fewer than a quarter were approved by China. He also said that some companies, fearing significant losses due to expected freight delays, had already submitted application forms in advance. "We have many member companies currently suffering losses due to these supply bottlenecks," he said.
Reuters reported that China had previously agreed to expedite the approval of licenses for key raw materials for European companies, but did not meet the EU's request for extended license periods or the cancellation of export licensing requirements for the EU.
China holds a dominant position in the global rare earth magnet market. Chart by Financial Times
On April 2, 2023, the Trump administration announced levying "reciprocal tariffs" on Chinese goods. Two days later, China introduced a series of measures to precisely retaliate, adding tariffs and implementing export controls on seven types of medium and heavy rare earth-related items, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.
These rare earths can be used to make high-performance magnets that can withstand high temperatures, such as dysprosium, terbium, and samarium, which are essential for military fighter jets, missiles, drones, and rotors, motors, and transmissions of electric and hybrid vehicles. As a result, car manufacturers in Europe faced production delays and widespread shutdowns, and chip manufacturers had also applied for exemptions from China.
Bloomberg mentioned that after the tariff trade disputes between China and the US earlier this year, rare earths became China's most powerful countermeasure. Although the two countries have since engaged in multiple rounds of economic and trade talks, easing the tension, the outside world remains wary of China's dominant position, accounting for about 90% of global rare earth magnet production.
The US "Politico" website noted in a report this month that critical metals such as lithium, copper, nickel, and rare earths are essential for fields such as renewable energy and electric vehicles. However, the EU produces almost none of these metals internally. Data shows that the EU imports nearly 100% of its rare earths from China.
According to a report by the Jacques Delors Institute, a European think tank, China has firmly controlled the key raw material supply chain, refining 40% of the world's copper, 60% of lithium, 70% of cobalt, and nearly 100% of graphite. The report pointed out: "The EU imports nearly 100% of its rare earths from China. This leaves the EU at risk of supply disruptions and price fluctuations, amplifying the vulnerability of key areas."
After China implemented export control measures on rare earths, the West felt "choked" and began pouring money into developing non-Chinese supply chains.
On September 8 local time, German Chancellor Scholz, during an event in Berlin, exaggerated the so-called "reducing dependence on China," vowing to reduce dependence on China in key materials and claiming that China is ready to "use" Germany's weaknesses - trade loopholes.
Scholz said, "For our policy towards China, this means we seek cooperation as much as possible - on climate policy issues, global crises, and many other challenges. But at the same time, we recognize that systemic competition is intensifying. Therefore, to ensure our security and competitiveness, and for the interests of strategic sovereignty, we must prioritize diversifying our raw material and trade supply chains."
However, the British Financial Times recently published an article pointing out that Western efforts to build competitive supply chains and break China's dominance will face challenges in terms of cost and scale. Analysts generally believe that due to decades of national planning and strategic acquisitions, China has become the lowest-cost producer at every stage of the rare earth value chain, while most Western companies have always followed the principle of "pursuing the lowest cost at all costs."
In June this year, Chinese Foreign Ministry spokesperson Guo Jiancong stated that China has always adopted a responsible and non-discriminatory attitude, fully considering the reasonable needs and concerns of various countries, and legally and regulation-based review of export license applications. Considering the dual-use nature of rare earth-related items, China has taken relevant measures in accordance with its regulations on the export control of dual-use items, which conforms to international practices and is not targeted at specific countries.
Chinese Ministry of Commerce spokesperson He Yadong previously stated that as a responsible major country, China fully considers the reasonable needs and concerns of countries in the private sector, legally and regulation-based review of export license applications for rare earth-related items. A certain number of compliant applications have been legally approved, and the approval work for compliant applications will continue to be strengthened.
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