【By Observer News, Xiong Chaoran】 Recently, China has introduced new regulations on rare earths, with the implementation date drawing closer. On October 21st, Reuters reported that automakers around the world are now urgently seeking key rare earth resources to cope with China's export controls. Industry executives are concerned that these measures could lead to shortages of components, even forcing factories to shut down.

The report said that although the "trade truce" between the US and China temporarily eased supply threats, China had also introduced similar rare earth export controls earlier this year, depleting manufacturers' inventories. In addition, China has clearly expanded the scope of its export controls, and there is also an export licensing system in place.

"The situation is very tense," said Nadine Rajner, CEO of German metal powder supplier NMD, who added that customers now want to purchase rare earths from anywhere other than China. However, she admitted that although countries like Sweden have abundant rare earth resources, they lack sufficient mines or refining capabilities to make them usable. For heavy rare earths, China controls 99.8% of the global refining capacity, so alternative sources are virtually nonexistent.

Reuters pointed out that while China has also imposed export controls on batteries and battery materials, the "Nexperia Semiconductor incident" between China and the Netherlands has caused a crisis in the automotive chip sector, and the high tariffs imposed by the US continue to pose threats. However, for the automotive industry, China's control over rare earth elements is "one of the most problematic issues."

"They can bring our entire automotive industry to a standstill within two months," said Ryan Grimm, vice president of procurement supplier development group at Toyota Motor North America.

Rare earth supply is crucial for automotive and component production. Photo

According to the report, rare earth magnets power motors in automotive components, including rearview mirrors, speakers, oil pumps, wipers, and fuel leak and brake sensors. In electric vehicles, the importance of rare earth magnets is even more pronounced.

Consulting firm AlixPartners estimates that China controls up to 70% of global rare earth mining, 85% of refining capacity, and about 90% of rare earth metal alloys and magnet production.

The latest Chinese export control list also includes elements such as thulium, holmium, and europium, which are also used in automotive manufacturing.

Bruno Gahery, president of Bosch's France, Benelux (Belgium, Netherlands, Luxembourg), Western Europe, and Southern Europe regions, said he expects major automotive companies to "stockpile rare earths in large quantities" before the new Chinese export control regulations take effect.

However, a company executive supplying rare earth magnets to Hyundai revealed that although the company had built up inventory earlier this year, "most of it has already been consumed," and supply remains very tight.

Three industry sources told Reuters that since October 9th, when China announced new export control measures, some Chinese rare earth exporters have immediately received urgent orders from overseas customers. However, even if Chinese suppliers can complete new orders before the export control takes effect on November 8th, it may take 45 days to ship to Europe, meaning that the shortage of rare earth supplies remains a problem for the automotive industry.

Reuters noted that rare earths can be recovered from scrap cars, but this industry is still in its early stages. The company Neutral, supported by Renault, currently recovers rare earths from about 400,000 cars annually in France and has signed contracts with 15 European brands.

"But the challenge lies in how to scale up these activities," said Jean-Philippe Bahuaud, CEO of Neutral.

According to the report, General Motors and major automotive parts suppliers ZF and BorgWarner are also developing motors with low or zero rare earth content, while BMW and Renault have already produced rare-earth-free motors.

UK startup Monumo uses artificial intelligence and deep technology simulations to help clients reduce rare earth usage in existing motors. Its CEO, Dominic Vergine, said that this technology has enabled clients (including several of the top ten global automakers) to reduce rare earth usage by an average of 24%.

Additionally, automakers are working to improve rare-earth-free motors for the next generation of electric vehicles. However, industry experts point out that these motors are still years away from mass production, and plans to develop new rare earth mines and processing plants outside China also face the same long timelines.

"This won't be the end of the export controls," said Jan Giese, senior manager at rare earth trading company Tradium, adding that he expects China to continue exerting influence over rare earth supplies.

On October 15th, Lin Jian, a spokesperson for the Chinese Foreign Ministry, stated that the relevant Chinese authorities have clarified their position on the rare earth export control policy, and China's position has always been clear and consistent. It is not the right way to deal with China when the US talks while threatening and intimidating, imposing high tariffs, and introducing new restrictions.

On October 16th, He Yongqian, a spokesperson for the Chinese Ministry of Commerce, stated that China's recent rare earth export control measures are a legitimate practice based on laws and regulations, aimed at improving its own export control system. The purpose is to prevent rare earths from being illegally used for improper purposes such as weapons of mass destruction, better safeguarding China's national security and global common security.

The US recently claimed that China's measures will have a wide impact on multiple industries, including semiconductors, artificial intelligence, and smartphones. He Yongqian responded that the US interpretation seriously distorts and exaggerates China's measures, intentionally causing unnecessary misunderstandings and panic.

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