Global capitals and automakers are fretting over China’s restrictions on exports of critical minerals, which have led to plant shutdowns and production delays.
On Tuesday (June 3), global automakers sounded the alarm over Beijing’s restrictions on rare earth alloys, mixtures, and magnets. With no immediate relief, this left them to fend for themselves and scramble for alternative sources.
China announced these restrictions in April amid an escalating trade conflict with the US, disrupting critical supply chains central to automakers, aerospace manufacturers, semiconductors, and military contractors.
Concerns raised by automakers
In India, Bajaj Auto recently warned that further delay in securing rare earth magnet supply from China would cause production delays. It added that it was organising a trip for its executives to China to escalate the matter further.
On Wednesday, German carmaker BMW said that the rare earths shortage affected part of its supplier network. Europe’s auto supplier association, CLEPA, also said several production lines have been shut down due to the shortage.
In May, a group representing General Motors, Hyundai, Toyota, and Volkswagen, among others, wrote a letter to the Donald Trump administration of the US expressing similar concerns.
“Without reliable access to these elements and magnets, automotive suppliers will be unable to produce critical automotive components, including automatic transmissions, throttle bodies, alternators, various motors, sensors, seat belts, speakers, lights, motors, power steering, and cameras,” the Alliance for Automotive Innovation wrote in the letter.
Reuters quoted Hildegard Mueller, head of Germany’s auto lobby, saying that the problem must be solved urgently.
“If the situation is not changed quickly, production delays and even production outages can no longer be ruled out,” he warned.
Nations seeking urgent diplomatic talks
China’s ‘rare earth’ move has left nations in shock, with many deciding to contact Beijing directly and secure concessions.
According to Reuters, diplomats and executives from India, Japan, and the EU have sought meetings with their Chinese counterparts to reach a solution.
‘No one should be surprised’
Meanwhile, experts say no one should be surprised by Beijing’s assertive approach to rare earth supplies.
Frank Fannon, a minerals industry consultant and former US assistant secretary of state for energy resources during Trump’s first term, said, “I don’t think anyone should be surprised how this is playing out. We have a production challenge (in the US), and we need to leverage our whole-of-government approach to secure resources and ramp up domestic capability as soon as possible. The time horizon to do this was yesterday.”
China’s dominance
The crisis highlights China’s undisputed dominance in the rare earth sector, which produces 90% of the global output.
China’s slow pace in easing its export controls on critical minerals has drawn criticism from Trump. He claims China breached last month’s agreement to reduce tariffs and trade restrictions.
Trump has aimed to reshape the trade relationship with China by imposing high tariffs on billions of dollars worth of imports, hoping to reduce the trade deficit and revive manufacturing jobs.
However, after imposing tariffs as high as 145 per cent, he had to reduce them due to market reactions.
In response, China has introduced its tariffs and is using its control over key supply chains to pressure Trump. This week, Trump and Chinese President Xi Jinping are expected to discuss these issues, with export controls likely being a significant topic.
