China Rare Earths: EU Automotive Industry Faces Increased Pressure

This April, China announced a suspension of exports for multiple rare earth materials and related magnets. This decision has affected the supply chains of global automotive, aerospace, semiconductor, and military enterprises. China accounts for approximately 90% of the world's rare earth production.

According to Reuters, EU Trade Commissioner Šefčovič stated on Wednesday that he had reached an agreement with Chinese officials to clarify issues regarding rare earth exports as soon as possible. EU Industry Strategy Commissioner Thierry Breton said, "We must reduce our dependence on any country, and our reliance on China exceeds 100%."

Breton stated on Wednesday that these export restrictions have further strengthened the EU's determination to diversify its supply sources. Brussels has already identified 13 new projects aimed at increasing the supply of critical metals and minerals outside the EU.

The European Automobile Suppliers Association (CLEPA) said that due to supply disruptions, some production lines have been forced to shut down. Since early April, only one-quarter of the export licenses applied for by parts suppliers have been approved, while many others were rejected due to "highly procedural reasons." Although the association did not specify the affected companies, it warned that more factories may be shut down.

China's export restrictions, though announced alongside countermeasures against U.S. tariffs, affect the entire globe.

Daimler's production chief Britta Seeger said that the company is discussing establishing a "buffer mechanism," such as stockpiling, to prevent supply disruptions. Ford CFO John Lawler said at an investor conference, "This puts pressure on highly coordinated supply systems where components are typically ordered weeks in advance." She pointed out that export controls increase management burdens, sometimes smoothly, sometimes not. "We are dealing with this, but it remains a persistent issue."

Both German and American automakers have expressed concerns that China's export restrictions threaten production. An Indian electric vehicle manufacturer also expressed similar concerns last week. ZF Friedrichshafen's executive Michael Grestlein noted that the company can still obtain most of the required permits, but he worries the situation could evolve into a chip crisis reminiscent of the pandemic, when global auto production was cut by millions of vehicles.

Wolfgang Weber, CEO of the German Electrical and Digital Industries Association (ZVEI), said that some companies only have several weeks or months of inventory and are urging the government to intervene quickly to resolve the issue.

Original Source: https://www.toutiao.com/article/1834040567065609/

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