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-

The DFM rose 0.2% yesterday on turnover of AED 292 mn. The index is down 1.1% YTD.

In the green: Ithmaar Holding (+15%), Ekttitab Holding (+14.4%) and United Foods (+8.3%).

In the red: National Cement (-9.9%), Dubai Refreshment (-6.9%) and Dubai Islamic Ins. and Rein. Co. (-4.8%).

Over on the ADX, the index fell 0.1% on turnover of AED 665.9 mn. Meanwhile, Nasdaq Dubai was up 0.2%.

CORPORATE ACTIONS-

Amlak Finance will divest its investments outside the UAE, according to a DFM disclosure(pdf). The move comes in line with a UAE Central Bank regulation requiring finance companies to offload assets not tied to their core business activities.

REMEMBER- The company’s general assembly approved the sale of some of its investment properties, including its holdings in Dubai’s Ras Al Khor in March.