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According to industry participants, China is allowing rare earth cargo under new export control rules, but the slow pace of approval threatens disruption in the global supply chain.
In early April, Beijing imposed export restrictions on seven rare earth elements and permanent magnets, essential for products ranging from electric vehicles to turbines, humanoid robots and fighter jets.
Exporters, China-based industry associations and supply chain experts said after a few weeks of delays, Beijing’s Commerce Ministry approved a license to export to Europe, but it was too late to meet demand.
“The windows to avoid major damage to production in Europe are rapidly closing,” said Wolfgang Niedermark, an executive committee member of the German Federation of Industrial Associations known as BDI.
US manufacturers, including Tesla, Ford and Lockheed Martin, have expressed concerns about new China’s export controls in recent investors briefings.
One executive of China’s European industrial executive who asked not to name it said the current delays were “unacceptable” for foreign manufacturers.
“What I’m witnessing on the ground is that there’s really incompetence. They underestimated what the impact was and what you need to prepare at the work level.”
China’s expansion of control over rare earth exports came from the response to the swept tariffs announced by US President Donald Trump on April 2.
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Control required exporters to obtain licenses from Ministry of Commerce officials for the delivery of seven targeted rare earths and permanent magnets made from them, highlighting the geopolitical leverage granted by China’s control of global mineral supply.
It is unclear whether China has begun to approve exports to the US as two economic superpowers agreed to a ceasefire in the tariff war this month.
Magnetic materials from Yantai Zhenghai, an exporter based in China’s East Sea and Shanghai province, said it had received its export license and “resumed” orders from some customers.
Separately, the two, familiar with the situation, said at least one cargo bound by the German business of automaker Volkswagen has been approved.
VW said the supply of parts containing rare earths is stable and its suppliers have been granted “a limited number of these (export) licenses.”
China’s Commerce Ministry did not respond to a request for comment.
There is widespread concern in the industry that China’s licensing bureaucracy will be overwhelmed with the number of applications increasing.
European executives said European executives would violate the terms of the licence because their cargo would “not know how to prove” that they would not be re-exported to the US.
Tesla boss Elon Musk told investors last month that China had requested assurances that the rare earth magnets needed for robotic arms will not be used for military purposes. “That’s an example of the challenge there. I’m sure we’ll overcome these problems,” he said.
Rajesh Jejurikar, chief executive officer of the car unit of Indian conglomerates Mahindra & Mahindra, said the process of obtaining end-use certification aimed at ensuring the guarantee of consumables was “not clear at this time.”
Manager of Chengdu Galaxy Magnets, which sells permanent magnets, said it was a concern for Chinese authorities to stop military-related shipments. She said her company is helping clients submit statements to authorities for export approval, but “military-related” applications are not permitted.
“Exporting non-military applications may still be permitted,” she said.
Permanent magnets are used in fighter jets such as Lockheed’s F-35, and new controls are expected to cause short-term problems and force long-term supply chain shifts.
Lockheed Chief Financial Officer Evan Scott told investors this week that the company had enough rare earth materials that year, and hoped that U.S. officials would prioritize Lockheed’s supply “in light of the importance of our program.”
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Cameron Johnson, a manufacturing and supply chain expert and partner at Tidalwave Solutions in Shanghai, said he believes that several large companies with long-standing ties with China have been allowed by the country to access rare earths before the licensing application was approved. “There’s still some substance to leave.”
Cory Combs, associate director of Beijing-based consulting firm Trivium China, said there was “certainly no evidence” that China “certainly died.”
Given the temporary 90-day US-China tariff ceasefire, Combs said it hopes the Commerce Department will grant more approvals, but warned that uncertainty remains. “Everyone wants to provide clarity to MOFCOM, but China’s strategic leverage depends in part on its ability to pull out export control levers unless the US offers satisfactory transactions.”
Experts said the latest rare earth control adds a driving force to Western efforts to reduce dependence on China.
