High-level talks concerning China’s export regulations on rare earth elements have brought a temporary sense of relief to U.S. businesses. On Thursday, China’s commerce ministry disclosed that a number of export permits for rare earth elements and related products had been approved. This announcement came shortly after U.S. President Donald Trump stated that China would supply these crucial elements and their derived magnets to U.S. companies following trade discussions in London.
“I would be thrilled if China begins to release some of those heavy rare earths into the global market because it’s essential for avoiding a shutdown of the world economy,” expressed Mark Smith, CEO of NioCorp., a company developing a new mining project in Nebraska aimed at producing niobium, scandium, titanium, and various rare earths.
Throughout the most recent trade negotiations between Beijing and Washington, rare earth export controls overshadowed tariff discussions. In April, China instituted permit requirements for seven heavy rare earth elements, threatening the production of cars, robots, wind turbines, and other high-tech products in the U.S. and beyond.
Negotiators from both nations have reportedly laid the groundwork for future talks, although specific agreements need ratification by President Trump and Chinese President Xi Jinping. Despite ongoing uncertainty, businesses cautiously welcomed these discussions.
Rare earth elements, critical to numerous products, are difficult to extract and predominantly processed by China, which supplies about 90% of the world’s needs. While not actually rare, these elements are found in economically viable concentrations only in certain locations. During the trade tensions in April, China placed export permits on seven heavy rare earths, citing national security and international duties against proliferation.
Elements such as terbium and dysprosium, essential for creating permanent rare earth magnets that can withstand high temperatures, play pivotal roles in electric vehicles, wind turbines, and military applications like jet engines and nuclear submarines. While some rare earth elements used in magnets are mined domestically in California by MP Materials, China remains the primary source of heavy rare earths. MP Materials has halted sending its mined heavy rare earths to China for processing and is working on expanding its own processing capacity while constructing a new magnet plant in Texas.
The potential for rare earth shortages is beginning to affect manufacturing. Neha Mukherjee, a rare earths analyst at Benchmark Mineral Intelligence, anticipated that many companies would face shortages toward the year’s end. However, issues are surfacing earlier than expected. Some companies, particularly auto manufacturers in Europe, appear to be inadequately prepared, having not stockpiled sufficient rare earth resources. American companies are also at risk of facing constraints if the situation persists.
The European Association of Automotive Suppliers reported significant disruptions already occurring due to China’s restrictions on rare earth exports, with several production lines and plants in Europe shutting down and further impacts likely as inventories dwindle.
Details regarding the recent trade deal on rare earth shipments remain sparse. He Yadong, the spokesperson for the Chinese commerce ministry, indicated that China would consider the reasonable needs of all countries when reviewing rare earth export permit applications. He further emphasized that imposing export controls on rare earths aligns with international practices, given their dual-use in civilian and military applications.
Despite the current agreement between the U.S. and China, concerns remain about future supply cutoffs. Gabriel Wildau from consultancy Teneo noted that China’s export licensing system for heavy rare earths is permanent, signaling an ongoing risk. China is unlikely to approve exports in quantities significant enough for U.S. companies to build a stockpile, maintaining its leverage in negotiations. Restrictions on U.S. defense companies might particularly persist.
Mark Smith of NioCorp pointed out that even with temporary relief, China’s limitations on rare earth exports for U.S. military use may continue. “When dealing with defense applications like jets or submarines, reliable access to heavy rare earths is paramount,” Smith remarked.
Smith expressed hope for resolving America’s heavy reliance on China for these elements. “I earnestly wish this situation opens our eyes,” he shared. “Let’s address what needs to be addressed once and for all.”