It is the indisputable, if not exactly celebrated in the West, master of the rare earths industry.
Rare earths are used in a perhaps surprisingly wide variety of products.
Because EVs feature greater amounts of those rare earths than internal combustion engine cars.
Things are not looking good for the car industry right now but there is, as always, a silver lining.
Yet the rare earths drama may boost Europe’s resolve to actually start working on that supply chain, however long it takes to build it.
China imposed limitations on rare earth exports earlier this year. With the move, the US-China trade dispute entered a new phase where the two countries stopped trying to out-tariff one another and instead took more decisive action. The issue is that the limitations aren’t limited to U alone. S. . Businesses. Additionally, they might deal the dying blow to Europe’s faltering auto sector.
Ninety percent of the world’s capacity to process rare earths is in China. It is without a doubt, if not particularly renowned in the West, the industry leader in rare earths. It is now using this stance to point out to trading partners that have gone above and beyond to limit Chinese exports to their own nations and areas—basically, the same thing Washington does when it uses the dollar’s dominance to impose sanctions on governments it disagrees with.
It may surprise you to learn how many products use rare earth elements. More precisely, automakers on both sides of the globe are having trouble with rare-earth magnets. In a letter to the Trump administration in early May, the industry group Alliance for Automotive Innovation stated that “automotive suppliers will not be able to produce critical automotive components, including automatic transmissions, throttle bodies, alternators, various motors, sensors, seat belts, speakers, lights, motors, power steering, and cameras, without reliable access to these elements and magnets.”.
The letter is part of what appears to be an increasingly loud call for assistance, as reported by Reuters in a recent report on the restrictions on rare earths. Leaders of the auto industry, including Toyota, Volkswagen, and General Motors, signed it and expressed gratitude to the administration for its efforts to address the problem. The automakers claimed that it would only be a matter of time before auto factories began to close if they didn’t.
See also: Trump’s Global Coal Comeback.
Europe is experiencing the same thing, but it’s worse because of Trump. S. . Electric vehicles are no longer a concern for automakers. There is a lot of concern about EVs among local automakers due to the current European Parliament and the Commission. because EVs have higher concentrations of those rare earth elements than cars with internal combustion engines. The production and sale of a specific minimum quantity of these EVs over the next three years has also been mandated for European automakers.
The European Union’s trade commissioner, Maros Sefcovic, stated this week that “I told my Chinese counterpart about the alarming situation in the EU car industry — the rare earth and permanent magnets are essential for industrial production… this is extremely disruptive for industry,” according to the Financial Times. “Carmakers are warning of huge production difficulties in a short period of time,” he continued. “.”.
Put another way, time is running out, and China doesn’t appear to be in a rush to stop it. Beijing put restrictions in place in mid-April, but they are neither direct nor literal. For anyone wishing to purchase rare earth magnets from Chinese manufacturers, they take the shape of a new licensing system. The potential buyer must wait, submit a license application, and supply a significant amount of information in order to accomplish that. According to a Bosch representative, the application procedure was “time-consuming and complex, partly due to the need to collect and provide a lot of information.”. “.”.
Due to this complexity, only a small number of suppliers of auto parts have been given these licenses, so it’s really only a matter of time until the automakers freak out. For European automakers, however, this comes at a very bad time, even though EV sales have significantly increased. They still have to make a healthy profit on their electric vehicles, and they should be producing more of these, which translates to a lot more rare earths.
After President Donald Trump accused China of breaking a deal the two had previously reached on the temporary relaxation of trade warfare, including tariffs and other trade restrictions, things are not going well in the United States either. Trump was retaliated by claiming that he was the one who first reduced semiconductor exports.
There is always a bright side, even though the car industry is currently not doing well. It consists of the world’s complete reliance on a single source of rare earth elements, which is not a safe or sustainable situation. Although creating their own supply chains for these vital materials has been discussed extensively in both Europe and the US, actual action has not been taken. Even if it were, China has shown that it takes years to establish a supply chain from the ground up. However long it takes to construct, the drama surrounding rare earths might strengthen Europe’s determination to begin working on that supply chain. Dependency on imports may be lethal.
Written for Oilprice.com by Irina Slav.
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