China warns foreign companies against hoarding rare earths
China has issued warnings to foreign companies against stockpiling rare earth metals, signaling its intent to tighten control over exports of these critical materials amid rising global demand and geopolitical tensions.
The move comes as fears grow over Beijing’s export curbs on rare earths and related products such as permanent magnets, essential components in electric motors and numerous high-tech industries, Caliber.Az reports, citing foreign media.
According to two sources familiar with the situation, Chinese authorities have cautioned that companies building large inventories risk facing further supply restrictions. One insider explained, “China is telling companies they cannot go out and build huge inventories in rare earths, or they will face shortages.” Another source added, “This will be a leverage point from now on,” highlighting Beijing’s strategy to maintain maximum bargaining power.
China dominates the rare earth sector, producing about 90 percent of the world’s supply and manufacturing 94 percent of permanent magnets. The country has previously wielded this dominance during trade disputes, notably restricting exports amid the US-China tariff war. In April, Beijing added seven categories of medium and heavy rare earths to its export control list, sparking shortages in industries like automotive manufacturing.
While the recent US-China tariff truce included a 90-day extension, rare earth export restrictions remain a key sticking point in ongoing negotiations. One participant in the talks noted, “This is still definitely an issue.”
China regulates rare earth output through strict mining and processing quotas, with only two state-owned firms receiving allocations last year. Although exports have partly resumed following complaints from US and European companies, controls remain stringent. The US-China Business Council (USCBC) reported that half of its member companies’ applications for rare earths remain pending or rejected.
“Applications are also reviewed line by line,” the USCBC noted. “Any discrepancies can result in the delay or return of the application.”
To mitigate supply challenges, some Western companies, like US motor maker Regal Rexnord Corp, have shifted production to China. CEO Louis Pinkham remarked, “For the last four months, I have been on one or two calls every week, working with our teams to manage this situation. There is no question that this is not a great use of time.”
China’s commerce ministry declined to comment on the issue. With its tight grip on rare earth exports, Beijing continues to wield significant influence over this critical global supply chain.
By Vafa Guliyeva