China's rare metals restrictions threaten car manufacturers

China’s export restrictions on rare earth metals could trigger disruptions for manufacturers of electric vehicles within a few months, the Financial Times reports. The full impact of these latest controls is still unclear, but carmakers are already raising concerns based on current stockpiles.

What’s happening? The new controls now encompass seven heavy and medium rare earths, such as dysprosium, terbium, and samarium, vital for manufacturing electric vehicles and wind turbines. These controls expand on measures that have been implemented by China since 2023 in response to US restrictions on chip technology, requiring exporters to obtain licenses for each overseas shipment and banning re-exports to the US.

The new controls came after US President Trump launched a probe into mineral and product imports last week, to assess the need for higher tariffs. Findings are due within 180 days, which could override the tariffs imposed last month.

Beijing’s strategy: The expanded measures are understood to be a response to the 145% tariff hike levied by the Trump administration on Chinese goods, in a bid to pressure US companies to lobby Washington into changing tariff policies, an unnamed senior automotive executive told the financial publication.

The implications could be severe: EV automakers were caught off guard, with suppliers holding only 2-3 months’ worth of magnets, causing “genuine problems” in the automotive supply chain, said Jan Giese, Frankfurt-based Tradiu’s Senior Manager for Minor Metals and Rare Earth Elements. An unnamed Japanese government official echoed the same concern, telling the salmon-colored paper that there’s not enough time to establish alternative supply chains before current stockpiles are exhausted.

“It’s really kind of tough all the way around,” S&P Global auto analyst Stephanie Brinley told Politico's E&E News. The projected 700k drop in US car sales this year makes it comparable to the tough markets of the 2009 recession and the 2020 pandemic, Brinely said.

IN CONTEXT- China holds a near monopoly on heavy rare earths processing, and the imposed export controls cover medium and heavy rare earths — materials that are difficult and costly to extract, both financially and environmentally — Giese told the Financial Times.

Breaking the monopoly: Japan and other nations are pinning hopes on Australia’s Lynas, as the rare earth mining company is set to expand its Malaysian processing site to produce dysprosium and terbium by mid-2025.

MARKETS THIS MORNING-

Asian markets are slightly inching down this morning, affected by Wall Street losses after Trump’s attacks on the Fed. Hong Kong’s Hang Send is down 0.6%, while Japan’s Nikkei is down 0.1%, and Shanghai Composite is slightly up 0.2%. Meanwhile, US futures are on the rise, signalling potential recovery when markets open.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.7% yesterday on turnover of SAR 3.6 bn. The index is down 4.1% YTD.

In the green: Alistithmar Reit (+9.9%), SPPC (+9.7%) and Nice One (+4.8%).

In the red: Dar Alarkan (-5.5%), EPCCO (-4.5%) and Riyadh Cables (-4.3%).

THE CLOSING BELL: NOMU-

The NomuC fell 1.2% yesterday on turnover of SAR 20.6 mn. The index is down 9.0% YTD.

In the green: Alqemem (+6.8%), Knowledgenet (+6.2%) and Mulkia (+5.3%).

In the red: Alrasheed (-7.8%), Lamasat (-5.7%) and TMC (-5.6%).

CORPORATE ACTIONS-

Astra Industrial Group’s shareholders approved a SAR 240 mn dividend distribution for FY 2024 at SAR 3 per share, it said in a disclosure to Tadawul (pdf). The distribution date is set for 29 April.

AlmuneefCompany for Trade, Industry, Agriculture, and Contracting’s BoD recommended a SAR 9.5 mn dividend distribution for FY 2024 at SAR 0.25 per share, it said in a disclosure to Tadawul. The dividends are pending general assembly approval, where a distribution date will be set.

Basic ChemicalIndustries’s (BCI) BoD proposed a SAR 27.5 mn dividend distribution for FY 2024 at SAR 1.0 per share, it said in a disclosure to Tadawul. BCI’s general assembly still needs to sign off on the move and determine the distribution date.

Saudi Chemical Company Holding’s top brass recommended a SAR 42.2 mn dividend distribution for FY 2024 at SAR 0.05 per share, it said in a disclosure to Tadawul. The move is yet to get the general assembly’s approval, which will also set the payment date.

Qomel Company’s shareholders approved a 100% capital increase to SAR 70 mn, it said in a disclosure to Tadawul. The increase will be funded with SAR 32.6 mn from the share premium balance and SAR 2.4 mn from retained earnings, issuing 3.5 mn new shares to be distributed at a 1-for-1 ratio among shareholders.