Chinese rare-earth dealers are dodging Beijing’s export curbs

Chinese rare-earth magnet companies are finding workarounds to their government's onerous export restrictions, as they seek to keep sales flowing to Western buyers without falling afoul of Chinese authorities.

- Jon Emont

The companies are tweaking magnet formulas to avoid using certain restricted rare-earth elements and devising other strategies to get powerful magnets out of the country, like embedding them in motors, according to employees of several large Chinese magnet companies and Western firms that buy from them.

The strategies—which are legal—don’t work perfectly and the new magnets sometimes behave differently than traditional ones. But Chinese companies have huge and growing magnet-making capacity, and say they are determined to find legal ways to maintain exports.

The drive is the latest twist in a long-running battle between China and the U.S. over rare earths. China dominates the global supply of rare earths and the magnets they are made of. They are crucial to making everything from cars to wind turbines and jet fighters.

Earlier this year, as Beijing traded blows with the Trump administration over U.S. tariffs on Chinese goods, Chinese authorities set up a new export-licensing regime, choking off the supply of rare earths and inflicting pain on Western businesses. As part of an October deal with the US., China agreed to postpone certain impending restrictions, although Western businesses worry the supply will nonetheless be insufficient.

That has motivated Chinese rare-earth companies to find ways to ease the flow.

One approach has been to use technical innovations. Certain powerful types of rare-earth magnets— often used for car engines, robotics and industrial machinery—typically use small quantities of dysprosium and terbium, two “heavy” rare-earth elements, to allow magnets to function at high temperatures. Chinese rules introduced in April mean that magnets with even small amounts of these materials require export licenses. It often takes weeks or months to gain approval—if it comes at all, according to rare-earth companies and traders.