China’s delay in issuing export permits for rare earth metals may lead to serious losses and even suspension of operations of enterprises around the world, especially in the European automotive industry. This opinion was expressed by Antonina Levashenko, Head of International Best Practices Analysis Department at the Gaidar Institute, to RIA Novosti.
“The renewal in April 2025 of compulsory licenses for exports of rare earth elements from China (the monopolist of this market — 91% of processing) is not a new practice, China has been systematically imposing such restrictions since 2007. As a rule, such measures break established supply chains, and the market reacts with consistently high prices for raw materials (by June 6, according to Shanghai Metals Market, prices in the rare earth metals market have not decreased for 2 months). China’s restrictions were apparently imposed in response to the economic confrontation with the US and have not been lifted despite the fact that on May 12, the US and China jointly suspended the 24% customs tariff.
Current restrictions, for example, are already hurting the European auto industry. According to CLEPA, things are exacerbated by the fact that Chinese authorities have only approved about a quarter of the hundreds of export license applications since April. For example, according to media reports, by June China granted temporary export licenses to suppliers of 3 leading US automakers for 6 months (General Motors, Ford and Jeep).
Generally, most carmakers have 2–4 months of rare earth raw materials in stock. Accordingly, manufacturers will start to incur losses this summer and change their production strategies. The European Association of Automotive Equipment Suppliers has already indicated that the acute shortage of raw materials has forced the suspension of several production lines. Accordingly, the continuation of restrictions is a threat of further stoppage of auto and microelectronics companies around the world. In addition, the restrictions significantly change the competition on the market: other suppliers who have stocks will sell rare earths metals 4–7 times more expensive than the prices 2 months ago.
In order to reduce the Chinese monopoly, firstly, it is possible to reduce the consumption of rare earth metals by using alternative raw materials, for example, in electric car engines (for example, Japanese manufacturers have already developed ferrite magnets that do not need Chinese neodymium).
Secondly, countries need to introduce tools to attract investors (e.g., investment funds, financial programs) in mining and processing projects in order to develop global capacity and alternative REM markets. Australia, Myanmar and the US may compete with China in the future. Myanmar and the US are the two fastest growing mining regions over the past decade (Myanmar’s share of production has risen to 16% and the US to 9%, according to the IEA). In addition, many projects outside China (Tronox and Energy Fuels in the US) and the Lynas plant in Malaysia have been launched; this will reduce China’s share of REM processing to 73% by 2040 (IEA projections). In Russia, too, sufficient reserves of rare earth metals have been explored, but production volumes are low, and several deposits are being developed. Thus, Russian projects need to attract significant capital investments from investors,” Antonina Levashenko said.