[By Guancha Network, Liu Chenghui]
Noveon is the only sintered neodymium-iron-boron permanent magnet producer in the United States. Last month, the company's phones were ringing off the hook every day.
Since China implemented export controls on seven categories of heavy rare earth-related items at the beginning of April, many buyers are urgently seeking alternatives to Chinese magnets.
However, Scott Dunn, CEO of Noveon, remains disheartened.
"You can't just start or stop production arbitrarily. What if everything returns to normal tomorrow?" Dunn sighed, saying that the Chinese have done an excellent job in the rare earth trade, and their model cannot be replicated elsewhere.
The Japanese "Nikkei Asia" website published an article on April 22, revealing the impact of China's rare earth export controls on Western importers. A senior executive from an Australian resources company described it as China firing a warning shot at countries like the U.S., stating that China could veto any decision.
The article pointed out that this move by China was one of its countermeasures against Trump's tariff policies, putting numerous Western countries in a complex situation. China has unparalleled advantages in the scale of its rare earth industry and the integrity of its supply chain, making it difficult for other countries to replicate China's model.
Despite efforts by the U.S., Europe, and Australia to establish alternative supply chains, China had previously strictly controlled the export of rare earth processing and magnet manufacturing technologies. These measures may further hinder Western efforts to expand their rare earth industries in the short term.
Rare earth minerals (Image source: Visual China)
Sintered neodymium-iron-boron permanent magnets produced by Noveon are widely used in electric vehicle motors, wind turbines, industrial robots, and even guided missiles and fighter jets, among nearly all defense systems. Therefore, they are considered vital to U.S. national security.
However, Dunn said that although callers offered to fly to the company headquarters to finalize deals, the company remains cautious about expanding production.
"In downstream processes, you can't just arbitrarily start or stop production and survive market cycles," he said. The company needs to accurately assess market reactions; what if everything returns to normal tomorrow?
Data from industry research firm Adamas Intelligence shows that Noveon employs around 100 workers and produces approximately 1,000 tons of neodymium-iron-boron magnets annually. In 2024, the U.S. imported about 7,500 tons of such magnets from China. The company plans to double its output over the next few years and eventually increase production to 10,000 tons at its current site, but this is merely a drop in the bucket compared to China's annual production of over 200,000 tons.
The report noted that China's scale advantage is unmatched, but the strength of its supply chain goes beyond sheer size. Since different applications require different types of magnets, it is impossible to mass-produce a single type. Each customer’s specific requirements necessitate setting up different production lines.
"The problem is, the Chinese have done an excellent job. They've actually successfully commercialized something that isn't remotely commoditized," Dunn said. Their model cannot be replicated elsewhere.
On April 4, the Ministry of Commerce and General Administration of Customs issued an announcement implementing export control measures on seven categories of medium and heavy rare earth-related items, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, which took effect upon publication.
A spokesperson for the Ministry of Commerce emphasized that the Chinese government's legal implementation of export controls on relevant items aims to better safeguard national security and interests while fulfilling international obligations such as non-proliferation. These items have both military and civilian uses, and their export control is a common international practice.
Analysts stated that China has strongly retaliated against the U.S., not only targeting mined minerals but also finished products like permanent magnets, which will be difficult to replace. Although export controls do not equate to a complete ban on exports, China can control the volume of shipments by limiting the number of export licenses issued.
Mel Sanderson, director of American Rare Earth Minerals and co-chair of the Critical Minerals Institute Trade Group, believes that "China's list selection was strategically considered. They picked things that are crucial to the U.S. economy."
Sintered neodymium-iron-boron permanent magnets are critical for numerous fields ranging from electric vehicle motors and wind turbines to industrial robots and defense equipment. Noveon Company
Terbium and dysprosium are two of the seven rare earth elements on China's export restriction list. They make neodymium-iron-boron permanent magnets more heat-resistant. China is not only the main supplier of terbium and dysprosium but also produces over 90% of neodymium-iron-boron magnets, with no other country possessing a complete supply chain for these magnets.
Industry insiders say that due to the need for export permits, some items on the list have been detained at the border. China has informed suppliers of compliance information, indicating that processing an export permit may take up to 45 days.
Senior industry figures, such as John Omerod, said that major manufacturers sourcing from China are urgently trying to figure out when their magnets will be released. With inventory dwindling, time is running short.
"If this issue isn't resolved in some way, we should see the impact within 90 days," he added. Even new material sources wouldn't suffice.
"Even if you could magically get some terbium and dysprosium from somewhere, you still need someone to manufacture the magnets," he said.
The report noted that as China further tightens export controls, the over-reliance of Western countries on China's rare earth materials and products becomes increasingly evident, making the task of finding alternative supplies more urgent.
Daryl Kuzubow, CEO of Australian company Alara Resources, said that recent developments "have intensified the urgency to establish alternative supply chains."
He said: "South Korea, the U.S., and Europe are completely dependent on China for permanent rare earth magnets. Their electric vehicles, wind turbines, electronics, robots — products worth trillions of dollars annually — ultimately depend on China, so they must find alternative sources."
Kuzubow described China's actions as "a shot across the bow," warning the U.S. and other countries that "China can veto any decision."
"There are very limited alternatives for sourcing these magnets from the Chinese market," said David Merriman, an analyst at consultancy Project Blue.
China's new control measures also pose a significant problem for the U.S. Department of Defense. To apply for export licenses, suppliers must provide more details about their downstream applications.
Merriman said that these controls involve "dual-use" applications, meaning it will be "very difficult" for the U.S. to use controlled items for defense purposes.
In 2023, China also imposed strict restrictions on the export of rare earth processing and magnet manufacturing technologies. Jon Hykaway, founder of Canadian critical mineral advisory firm Stormcrow Capital, said that if China's latest control measures evolve into outright bans, they may further hinder Western efforts to expand their rare earth industries in the short term. "It adds additional problems for the West in establishing a complete rare earth magnet supply chain."
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Original source: https://www.toutiao.com/article/7496352573201318415/
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