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European automakers are in consultation with magnets and rare earth companies in the West as they seek to secure alternative sources of critical material amidst the shortages exploited by China’s export restrictions.
Rare earths are essential for automakers as they are used in permanent magnets in electric vehicle motors and other components found in all vehicles. China, which controls material supply and processing, tightened its export controls in April in response to the growing US tariff war.
German Mercedes-Benz is in discussion with the Rare Earths of the UK in the Rainbow to ensure future production from South African mines, according to one person familiar with the consultation.
Rainbow is backed by Techmet, a US government-owned mining company, and expects to begin production of rare earths that will fall into permanent magnets in 2027.
Mercedes declined to comment. Rainbow said it “continues to raise discussions with various industry participants,” including automakers and global trading companies.
Frank Eckard, chief executive of German magnet maker Bloody Rights, said Porsche and other automakers have sought additional supplies in the coming weeks to avoid closing production lines.
“Everyone started calling and said, ‘Since our line is still, can you give us 2,000 magnets? Price doesn’t matter. Let’s talk about what you can do, when you have it, how you can do it.’ It’s incredible,” Ecard said.
Porsche declined to comment on the supplier.
Eckard predicted that automobile production would cease by mid-July, unless companies were able to find alternative sources for magnets.
The shortage is not limited to Europe. In May, Ford temporarily halted production at its Sports Utility Vehicle Factory in Chicago due to a lack of magnets.
According to Eckard, some companies are seeking the magnetosphere using rare earth materials in magnets to see if they can produce magnets using rare earth materials from China.
Analysts at Berenberg said on Thursday that the geopolitical struggle over metals “catalyze investments in non-Chinese supply chains,” and that companies, including Rainbow, are expected to earn profits.
Automotive executives have repeatedly warned that rare earth magnet stockpiles will last from weeks to months.
One of the few exceptions is Hyundai. The Korean automaker and its sister company Kia have told investors they have rare earth stockpiles until at least the end of the year, according to two people with knowledge of the debate.
“As part of our standard business practices, we maintain appropriate inventory levels to support uninterrupted production. We do not disclose specific inventory details or sourcing strategies,” Hyundai said.
However, even if European automakers are using safe rare earth mined from outside China, the majority of magnet production occurs in Asia.
“We are not going to solve the problem unless Europe is practical about creating permanent magnets,” said one executive.
Beijing recently agreed to promptly approve rare earth export licensing for some European companies following warnings that new licensing systems for rare earth and associated magnets could lead to global shutdowns and disruptions to the global supply chain.
However, industry executives say manufacturers may be delayed in receiving rare earth and magnet shipments due to a backlog of license applications.
Even companies such as Volkswagen, which already receive licenses from China, will take weeks or months for shipments to arrive, they added.
Additional Reports by Song Jung-A in Seoul