Western auto industry is eager to obtain rare earths, and it is reasonable for China to protect its rare earth resources; export restrictions are about to be implemented.

According to Reuters, car manufacturers around the world are rushing to find rare earths, an important material. This is because they want to ensure inventory before China implements export restrictions, but China has a dominant share in rare earth production, and car manufacturers' executives are worried about potential component shortages and factory shutdowns.

Rare earth magnets are used in motors of various components such as car rearview mirrors, speakers, oil pumps, wipers, fuel leak detection sensors, and brake sensors, and are particularly important in electric vehicles (EVs).

Due to the Sino-US agreement, rare earths temporarily avoided supply risks, but similar regulations implemented earlier have already eliminated inventories. The Chinese government has tightened the acquisition of export licenses. Since then, China's export restrictions have sharply expanded, and manufacturers face global rare earth supply shortages.

According to estimates by consulting firm Alix Partners, China has up to 70% of the global rare earth mining, 85% of refining capacity, and about 90% of rare earth alloy and magnet production. China's new export control list includes elements used in automotive manufacturing, such as ytterbium, holmium, and europium.

The CEO of German metal powder supplier NMD, Nadine Reiner, said: "The situation is very tense, and customers want to purchase rare earths from anywhere other than China."

Reiner said that countries like Sweden have many rare earth resources, but lack the ability to mine or refine them. Moreover, in terms of heavy rare earths, China controls 99.8% of the global refining capacity, with almost no other sources. "Our company is almost sold out, with limited inventory," he said.

Rare earths can also be recycled from used cars, but the industry is still developing.

<库存已经耗尽>

Even if Chinese suppliers can complete new orders before the export control implementation on November 8th, it takes about 45 days to ship to Europe, and the automotive industry faces a rare earth supply bottleneck. China has also imposed restrictions on the export of lithium-ion batteries and battery materials, raising concerns about the supply of electric vehicle components.

In addition, last week, there was an intellectual property dispute between China and the Netherlands over the Dutch semiconductor manufacturer NXP. The company supplies a large number of semiconductors for automotive parts, triggering concerns that the factory might be forced to shut down. Automotive manufacturers also face challenges from US tariffs, but China's influence in the industry through rare earths is one of the most worrying issues.

Ryan Green, Vice President of Toyota North America Procurement and Supplier Development Group, said, "China can shut down the entire automotive industry within two months." An executive at a magnet supplier of Hyundai said that despite increasing inventory earlier this year, "most of the inventory has been depleted, and the supply is tight."

Three industry insiders told Reuters that shortly after China announced new export restrictions on October 9th, some Chinese rare earth exporters received orders from overseas customers.

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Automakers are taking measures to reduce their reliance on rare earths.

General Motors (GM) and major suppliers ZF and BorgWarner are developing electric vehicle motors that use less or no rare earths, while BMW and Renault have started producing motors that do not use rare earths. Automakers are also focusing on improving next-generation electric vehicles' rare-earth-free motors.

However, according to industry experts, it will take several years before rare-earth-free motors are actually applied, and efforts to develop new rare earth mines and refining facilities outside China may also take several years. In addition, China may hinder this initiative by keeping rare earth prices low.

Andy Leiland, co-founder of supply chain expert SC Insights, said that China focuses on defeating other countries in price wars and hopes to continue its strategy. "China can always lower prices to overwhelm competitors," he said, indicating that although automakers have cheap motors using rare earth magnets, it may be difficult to adopt expensive alternative parts.

Original: www.toutiao.com/article/1846998536081420/

Statement: The article represents the views of the author.