In March this year, the European Commission ambitiously unveiled a list of 47 strategic projects, boasting that it aimed to enhance the EU's production capacity for 14 out of 17 key raw materials, in order to change the situation where the EU was heavily reliant on China in this field.

At that time, EU Industry Commissioner Stefan Seijger even warned strongly: in the future, China's rare earths should not become "Russia's natural gas." Member states such as Germany and France also announced new mining, alternative sourcing, and extraction projects for rare earths.

EU headquarters

Just two months have passed, and Europe has made a complete turnaround, starting to complain about the slow pace of Chinese rare earth exports. The previous words like "de-risking" and "reducing dependence" are no longer mentioned at all.

The European Chamber of Commerce announced on Wednesday that due to a shortage of rare earths, some European manufacturers have faced a full-scale shutdown in recent weeks. This is because after the export ban on rare earths, new approvals were granted, but under strict conditions.

Report from WirtschaftsWoche

In particular, the European automotive industry faces huge risks!

"Four to six weeks later, the last inventory may run out. At that point, some production lines will have to shut down," Christian Grimmelt, partner at Berylls, a management consulting firm under AlixPartners, told Automotive Weekly.

This expert in raw materials expressed concern that this would lead to serious consequences: "The popularization of electric vehicles in Europe may be threatened by this." It is certain that the shortage of rare earths has already caused huge losses for companies: "The price of rare earths is now 40% to 50% higher than a few months ago," Grimmelt pointed out.

In fact, one of the largest companies in the rare earth industry, Baotou Tianhe Magnetic Technology, announced last week that it had obtained an export license. Tianhe Magnetic Technology supplies high-performance magnets to companies such as Volkswagen, Bosch, and Boge. However, "we have received some indications that these export licenses are limited in number," said Volkswagen. European insiders speculate that these finished products made from these raw materials may first be sold to the United States.

Volkswagen factory

When asked about the rare earth shortage and potential export issues, other automakers were evasive. However, one thing is certain: the uncertainty is great. "Due to the extremely complex and volatile situation, it is difficult to make reliable predictions based on guesses," commented a spokesperson for Mercedes-Benz. Regarding export licenses, the group is closely monitoring and assessing the current developments: "However, many things are constantly changing right now - therefore, it is difficult to make more specific statements at this time."

China possesses 87% of the global rare earth processing capacity and 91% of the global rare earth refining capacity. A person in the auto industry stated: "The bottleneck facing companies is not only rare earths but also permanent magnets made from rare earths." China's dominance in the field of rare earth magnets (made from so-called heavy rare earth elements) even surpasses its dominance in rare earth metals.

China leads the way in rare earths

Jens Eskilund, chairman of the European Union Chamber of Commerce, stated that this crisis is a direct result of the escalation of Sino-American trade tensions. In early April, China imposed export restrictions on seven key rare earth elements and magnets in response to U.S. President Trump's announcement of "reciprocal" tariffs.

In Europe, the affected materials are crucial for industrial products ranging from electric vehicles to wind turbines to defense equipment. China controls the vast majority of the world's rare earth refining capacity, making Western manufacturers particularly dependent on Chinese rare earths.

von der Leyen looking for rare earths in Central Asia

Tuesday saw a meeting between EU semiconductor companies and Chinese enterprises discussing this issue. The European side requested China to expedite the export of rare earths to Europe. The Chinese representative assured that they were working to meet the growing demand for licenses but provided no specific solutions or timelines.

Recently, when questioned about related export restrictions, a Chinese spokesperson pointed out that China's control measures comply with international practices. China's policies regarding the export of sensitive resources are "reasonable, legal, and compliant," but also noted that it will continue to strive to maintain global industrial chains and supply chains, and is willing to strengthen dialogue and cooperation on the issue of rare earth export controls.

China leads in rare earth mining and extraction technology

The problem in Europe is that it lacks raw materials like rare earths but unrealistically insists on reducing dependence on China.

In fact, the EU has done a lot to reduce its reliance on Chinese rare earths, such as mining rare earth resources in countries like Sweden, cooperating with Australia and others, establishing recycling industries, adopting new technologies that do not require these rare earth raw materials, etc.

But what happened? Raw materials expert Grimmelt stated that building a new supply chain requires huge costs and at least 10 years. Therefore, until sufficient alternative rare earths are obtained, the EU should stop talking about "reducing dependence on China."

Original article: https://www.toutiao.com/article/7510589272433590836/

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