China Is Still Choking Exports of Rare Earths Despite Pact With U.S.

Two weeks after China promised the U.S. it would ease the exports of rare-earth magnets, Chinese authorities are dragging out approval of Western companies' requests for the critical components, a situation that could reignite trade tensions between Washington and Beijing.

- Jon Emont

Two weeks after China promised the U.S. it would ease the exports of rare-earth magnets, Chinese authorities are dragging out approval of Western companies' requests for the critical components, a situation that could reignite trade tensions between Washington and Beijing. Western companies say they are receiving barely enough magnets for their factories and have little visibility of future supplies. Firms are waiting weeks as Chinese authorities scrutinize their applications—only to be rejected in some cases. And applications for raw rare earths, which are used to make magnets, are rarely granted.

As a result, Western companies are concerned that the shortages could soon affect manufacturing. Companies are so desperate for magnets that they are opting for expensive airfreight whenever licenses are granted to prevent costly production shutdowns. Some manufacturers are experimenting with workarounds that would allow them to make their products without the most powerful magnets.

"It's hand to mouth—the normal supply-chain scrambling that you have to do," said Lisa Drake, a vice president overseeing Ford's industrial planning for batteries and electric vehicles, earlier this week. Although she said the situation had improved, the scarcity of the rare-earth magnets is forcing Ford to "move things around" to avoid factory shutdowns, she said.

Manufacturers have taken the continuing challenges as a sign that new Chinese rare-earth export restrictions, introduced in April after President Trump raised tariffs on China, are here to stay—contrary to White House assertions that the flow of the critical components would return to normal.

"Yes, the export restrictions have been paused on paper. However, ground reality is completely different," said Neha Mukherjee, a rare-earths analyst at Benchmark Mineral Intelligence. The licensing process is plagued by "bureaucratic drag."