China/Autos: Rees & Magnets

 China remains the dominant force in the global rare earth elements (REE) supply chain, controlling approximately 69-70% of global rare earth mine production in 2024 and an even larger share—around 85-92%—of refining and processing capacity as of 2023. This dominance extends to rare earth magnet manufacturing, where China is responsible for about 87-90% of global capacity in 2024.

Recent developments in late May and early June 2025 have heightened concerns, as major automotive trade groups and automakers from the US, India, and Germany have issued urgent warnings about the impact of China’s new export controls on rare earth magnets. These controls are widely interpreted as China leveraging its supply chain dominance amid ongoing trade tensions, particularly with the United States.

The Alliance for Automotive Innovation, representing leading automakers such as GM, Toyota, Volkswagen, and Hyundai, sent a letter in May 2025 to the US administration. The letter warned that without reliable access to rare earth magnets, automotive suppliers would be unable to produce critical components, risking reduced production volumes or even complete assembly line shutdowns.

The alarm is driven by several factors:

-The automotive industry relies on “just-in-time” manufacturing, maintaining limited inventories—typically only 2-4 weeks’ worth—of critical components. Any significant disruption in the flow of magnets from China would quickly deplete these inventories, halting production.

-China’s new export licensing system, implemented in April 2025, has introduced major bottlenecks. Companies face complex, opaque, and time-consuming permit processes, with many applications still pending approval.

-Rare earth magnets are essential not only for electric vehicle (EV) motors but also for a wide range of components in both EVs and traditional internal combustion engine vehicles, including automatic transmissions, alternators, sensors, seat belts, speakers, lights, and cameras.

Immediate solutions are limited:

-Expediting export licenses depends entirely on China’s willingness to grant them and does not address the underlying dependency.

-Existing stockpiles are minimal and would only last a few weeks to a couple of months.

-Shifting production away from China is highly complex, costly, and not feasible in the short term due to entrenched supply chains and specialized equipment.

-Air freight for critical shipments is unsustainable for high-volume production due to cost and capacity constraints.

Long-term strategies are underway, but cannot address the immediate crisis:

-Building new mining and processing facilities outside China, such as MP Materials’ Texas plant and several Canadian REE projects, which are active at various stages (feasibility, preliminary economic assessment), could take years to become operational.

-Developing non-rare earth magnet alternatives (e.g., iron-nitride, tetrataenite) and reengineering automotive components for them requires years of R&D and investment.

-Increased recycling of rare earth magnets is promising but currently insufficient to meet industrial demand.

-Government stockpiling is a slow process and cannot quickly resolve current shortages.

The concerns voiced by US auto executives are legitimate. The industry’s heavy reliance on China for rare earth magnets, combined with China’s assertive export controls, exposes automakers to the real risk of factory shutdowns within weeks if restrictions persist.

While diplomatic efforts may ease immediate bottlenecks, the lack of diversified supply means the industry remains acutely vulnerable until long-term solutions come online.

SP

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Mining News: www.minestockers.com (Disclosure: the writer is a shareholder in minestockers.com)

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