[Source/Observer Network Qi Qian] China's control over the export of rare earth elements is in line with international practices and is not targeted at any specific country. However, as the impact of the control becomes apparent, Western enterprises are lamenting a "rare earth shortage" and are attempting to jointly hype up the so-called "weaponization of rare earths" in an attempt to launch a public opinion war against China.
"The global auto industry has seen the power of China's countermeasures against the US and is extremely panicked."
On June 9, Reuters published an article stating that several industry insiders pointed out that car manufacturers worldwide are concerned that China's restrictions on rare earth elements will lead to the next round of supply chain crises in the industry. However, the automotive industry is still struggling to find alternative sources for magnet supplies. Currently, in order to get through the supply bottleneck, carmakers are considering workarounds, including stockpiling rare earth magnets and shutting down some automobile production lines.
"The automotive industry is trembling."
In recent weeks, Frank Eckard, CEO of German magnet manufacturer Magnosphere, received numerous calls. Due to the supply shortage caused by China's export restrictions, frustrated automakers and parts suppliers urgently sought alternative sources for magnets.
"The entire automotive industry is in a panic, and they are willing to pay any price," said Eckard, adding that some people told him their factories might shut down by mid-July without backup magnet supplies.
In April this year, when former U.S. President Trump imposed exorbitant tariffs on China, Beijing swiftly retaliated by implementing export controls on a series of critical minerals and rare earth magnets. Industry insiders revealed that China is establishing an export licensing system. A spokesperson for the Ministry of Foreign Affairs reiterated on May 5th that China's export control measures comply with international practices, are non-discriminatory, and are not aimed at specific countries.
China accounts for more than 60% of global rare earth production and 92% of refined supply CNN chart
The report mentioned that amid ongoing trade tensions between the US and China, Western automotive executives have been forced back into "war rooms," worried that a rare earth supply crunch could trigger the third major supply chain shock within five years.
It was reported that the pandemic in 2020 caused car factories to shut down for weeks. From around 2021 to 2023, a semiconductor shortage led manufacturers to cancel production of millions of vehicles. The report stated that these crises prompted the automotive industry to strengthen its supply chain strategy, prioritizing backup supplies of critical components and emphasizing just-in-time inventory usage.
However, Eckard直言， judging from the calls he recently received, “no one learned lessons from the past.”
The European Association of Automotive Suppliers (CLEPA) said that several supplier factories in Europe have already closed, and more shutdowns are expected. CLEPA Secretary General Benjamin Krieg said, "Eventually everyone will face this issue."
Looking for alternative supplies? Difficult.
Over the past 30 years, China has maintained dominance in rare earth mining and refining.
Data from consulting firm AlixPartners indicates that China controls up to 70% of global rare earth mining output, 85% of refining capacity, and approximately 90% of the production of rare earth metal alloys and magnets, almost monopolizing the global rare earth processing sector. The U.S. Geological Survey also stated that from 2020 to 2023, 70% of the United States' rare earth compounds and metals imports came from China.
The report noted that in the automotive industry, rare earth elements enable electric vehicle motors to operate at high speeds and are used in headlamps, side mirrors, stereo speakers, oil pumps, windshield wipers, fuel leak sensors, and brake sensors, among other functional components. According to International Energy Agency data, an average electric vehicle consumes about 0.5 kilograms of rare earth elements, while a fossil-fuel-powered vehicle consumes half of that.
Rare earth magnet material image Social media
"China has the ability to play the rare earth card at any time," said Mark Smith, CEO of American mining company NioCorp, whose project in Nebraska is planned to start production within three years.
Reuters reported that in recent years, Western automakers have been striving to break free from dependence on Chinese rare earth magnets, even attempting to develop magnets that do not require rare earth elements. However, most efforts still need several years before they can meet demand.
The report gave examples such as General Motors and BMW, which are developing motors with zero rare earth content, but few companies can scale up production to reduce costs. The EU has introduced relevant bills to promote the development of European rare earth resources. However, Noah Barkin, a senior advisor at the American think tank Rhodium Group, said the EU's actions are not fast enough.
The UK Guardian reported that the West is不甘心 being dependent on key minerals and is beginning to look to Australia, which has abundant mineral resources. The Australian government has also promised increased investment in this area. However, several analysts直言 that given China's absolute control in this field, this move is like pushing a duck up a ladder, and Australia is simply not ready to break China's dominant position.
"China has one foot on the jugular of US and European defense systems," said Philip Kirschlechner, director of the Australian iron ore research institute, adding that Australia's efforts now "will not solve the problem." He pointed out that the fundamental issue is that even if Australia reserves more critical minerals, the refining process will still largely be controlled by China.
Global carmakers are looking for workarounds, but...
In the report, Reuters mentioned that some companies have developed marketable products but have struggled to compete with Chinese producers on price.
Dave Bender, co-head of precious metals services at Heraeus, said that the company's current capacity is only 1%, and if sales do not increase, it may have to shut down the related business next year.
Warwick Acoustics, a British company, has developed a speaker without rare earth elements, which is expected to be applied to a luxury sedan later. CEO Mike Grant said they have discussed with more than a dozen car manufacturers, but predicted that these speakers would not be applied to mainstream models within five years.
Ford Motor Company production line Ford website
While major car companies are seeking long-term solutions, they must also strive to avoid factory closures.
Previously, American Ford, the German Auto Industry Association, and Japanese and Indian car companies all warned that the approval speed of export licenses cannot keep up with their needs, and production disruptions are imminent.
An analyst said that supply shortages may force manufacturers to produce cars lacking certain components or temporarily halt production. There are also rumors that some carmakers and their suppliers are considering relocating part of their component production to China. The Wall Street Journal recently mocked that if this is true, it would be a boomerang for President Trump's trade war.
Reuters mentioned that automakers' reliance on China extends beyond rare earth elements. An EU Commission report in 2024 stated that China controls more than 50% of the global supply of 19 key raw materials, including manganese, graphite, and aluminum.
Regarding this, Andy Lelain, co-founder of supply chain tracking and analysis agency SC Insights, said that China's implementation of rare earth export controls is "just a warning," as any of these factors could potentially be used as "leverage" by China.
This article is an exclusive piece from Observer Network and cannot be reprinted without permission.
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