Fall in China's exports of rare earth magnets stokes supply chain fears

In April and May, Beijing squeezed global automakers with export curbs on a range of rare earths items and related magnets, while negotiators faced off over triple-digit U.S. tariffs on goods from the world's second-largest economy.

Four months on, after Washington and Beijing unexpectedly reprised threats of fresh tariffs and rare earth export curbs, worry is growing that China could return to the same playbook.

That would mean it reneges on a June deal with the United States to ease the flow of critical minerals.

China's shipments of rare earth magnets fell 6.1% in September from August, customs data showed on Monday, ending three months of gains, and dropping even before Beijing unveiled a dramatic expansion of its export licensing regime this month.

"The sharp swings in rare earth magnet exports show that China knows it holds a key card in international trade talks," said Chim Lee, senior analyst at the Economist Intelligence Unit.

EXPORTS FALL FROM AUGUST'S SEVEN-MONTH HIGH

The September fall to 5,774 tons from a seven-month high of 6,146 tons in August aligns with reports that China is already making it harder for firms to secure licences for exports of rare earth magnets.

Its commerce ministry is applying scrutiny similar to that seen in April, at the height of the trade war.

On an annual basis, September shipments rose 17.5%.

Last week, China's commerce ministry accused the United States of stoking global panic over its rare earth controls by deliberately misunderstanding the curbs, and said it would approve export licences intended for civilian use.

Still, analysts worry China could once again entangle civilian commercial users in curbs aimed at choking U.S. defence firms' access to critical materials.

"China's ability to throttle rare earth exports is an exceptionally powerful tool," said Dan Wang, China director at Eurasia Group.

Apart from disrupting production, such measures would fuel insecurity over access to critical industrial inputs and growing reliance on China, she added.

"The world has to adjust to its management style," she said, adding that Western countries are not used to complying with a monopolistic control of critical resources from countries on 'the other side'.

By country, Germany, South Korea, Vietnam, the United States and Mexico were the top five export destinations for Chinese rare earth magnets by volume last month.

Over the nine months of the year, exports of such magnets totalled 39,817 tons, a fall of 7.5% from the corresponding 2024 period.

NO SIGN OF BEIJING BACKING DOWN

Shipments to the United States fell 28.7% in September on the month, the data showed, while exports to Vietnam rose 57.5% over the same period.

The Netherlands processed 109% more rare earth magnets than in August, though the figure is skewed by the huge Rotterdam port, a major transit hub for Europe-bound trade.

Just before the release of the data, President Donald Trump told reporters aboard Air Force One that he did not want China to "play the rare earth game with us".

He suggested he might hold off on raising tariffs back to levels in excess of 100% if the world's top agricultural buyer committed to purchasing U.S. soybeans.

But Beijing shows no sign of backing down, adamant that its new wider curbs, set to take effect just days before the November 10 expiry of the latest 90-day tariff truce with the United States, are consistent with measures in other major economies.

President Xi Jinping is set to meet Trump in South Korea later this month, but economists warn that trade friction between the two biggest economies may be the new normal.

"The surge in exports during the third quarter came after it (China) eased export controls earlier in the year, but that's likely to drop again following the tighter restrictions introduced recently," added EIU analyst Chim Lee.