Following the implementation of rare earth export controls by the Chinese Communist Party in April, the export of rare earth magnets plummeted by 75% within two months. Industry insiders pointed out that Chinese magnet manufacturers are facing a double blow from weak domestic demand and interrupted exports. Despite the rare earth trade agreement reached between the US and China, it is difficult to reverse the losses in the short term.
According to a report by Reuters on Monday, within the two months after China implemented rare earth export controls, the export of rare earth magnets dropped by 75%, leading to several global car manufacturers being forced to halt production.
Just 12 hours after China and the US reached a rare earth trade deal on June 27, a state-owned Baotou Rare Earth Products Exchange released a message on WeChat stating that stocks are piling up in warehouses and warning that losses will not be quickly reversed. In May, the Baotou Rare Earth Exchange stated that the restriction measures had brought a “crisis” to some local magnet manufacturers.
In April, the Ministry of Commerce and the General Administration of Customs of China issued a public notice implementing export controls on certain medium and heavy rare earth-related items.
Two rare earth magnet manufacturers disclosed to Reuters that they expect their income to decrease this year.
An anonymous rare earth magnet producer stated, “This will have a significant impact on our export business, although it’s difficult to say exactly how much loss we will incur at the moment.”
Another source, who also declined to reveal their identity, mentioned that in April and May, small and medium-sized producers reduced production by around 15%.
Public documents indicate that China produces 90% of the world’s rare earth magnets and consumes most of them. In 2024, the export sales of 11 listed magnet producers accounted for 18% to 50% of their revenue.
Ellie Saklatvala, the head of metal pricing at commodities information provider Argus, commented, “Their sales are now under double pressure – from interrupted exports and weak domestic demand. They have temporarily lost important customer groups and are uncertain when they can regain them.”
Many magnet producers are facing a situation of weak domestic demand, especially amid price wars among key customer groups such as electric vehicle manufacturers, prompting them to demand discounts from magnet suppliers.
Additionally, four unnamed sources mentioned that the highly customized nature of many magnet products makes it challenging to resell them domestically, forcing magnet manufacturers to store them while awaiting permits.
Saklatvala added, “Looking at China’s recent export controls on antimony and other key minerals, it’s evident that restoring exports to normal may take longer than expected.”
David Abraham, a part-time professor at Boise State University in Idaho, stated that the export permit management agencies require a large amount of information, which represents a permanent change for the industry, increasing delays and costs for manufacturers.
Since the Chinese Communist Party implemented rare earth export controls in April, within just two months, global car manufacturers have faced a shortage of rare earth products, leading to some manufacturers halting production.
In 2015, China abolished the rare earth export quota management system and switched to an export permit system, while maintaining a quota system in the production process.
In the 2024 rare earth production quotas, the total control indicators for rare earth mining and smelting separation were 270,000 tons and 254,000 tons, respectively, showing a growth of 5.88% and 4.16% compared to the full-year quotas in 2023. In contrast, the growth rate of rare earth mining quotas in 2023 was 21.43%, and the smelting separation quota growth rate was 20.72%, indicating a significant slowdown in quota growth in 2024. All the aforementioned quota indicators are allotted to the state-owned China Rare Earth Group and Northern Rare Earth Group.
Around 2010, there were hundreds of rare earth mining and processing enterprises in China, but the government later cracked down on the rare earth industry. By 2013, almost all mining was controlled by 10 enterprises. Currently, the rare earth industry is dominated by two state-owned giants: China Rare Earth Group and Northern Rare Earth Group.
Unlike the upstream mining and midstream smelting industries, downstream magnet manufacturers have not undergone integration. There are dozens of producers and processors scattered throughout China, including companies like JL MAG Rare-Earth and Ningbo Yunsheng.