China’s rare earth export delays are threatening global supply chains

China’s stranglehold on rare earths is putting global supply chains under pressure, as slow licensing approvals threaten deliveries of materials critical to everything from EVs to fighter jets, the Financial Times reports. Beijing imposed new export controls in early April on seven rare earth elements and the permanent magnets made from them, and has since been slow to issue licenses — raising alarm bells across European and US manufacturers.

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The controls are widely seen as a direct response to US President Donald Trump’s April 2 tariff hike on Chinese goods. Exporters now need specific licenses from China’s Commerce Ministry to ship any of the seven targeted rare earths or related magnet products. Beijing’s move underscores its leverage over global mineral supply chains, as it dominates around 90% of global processing capacity for these materials.

Approvals have started — but far too slowly. Some export licenses have reportedly been granted to Europe in recent weeks, with Volkswagen also telling the salmon-colored paper that its parts suppliers secured “a limited number” of licenses and its rare earth supplies remain stable. However, manufacturers say approvals are not coming fast enough to meet demand, and the backlog of applications is growing by the day. “The window to avoid significant damage to production in Europe is rapidly closing,” said Federation of German Industries board member Wolfgang Niedermark.

But it seems like that approvals have so far yet to be given to US companies, but this may soon change with the agreed upon tariff war pause between the US and China, according to the paper.

American companies including Tesla, Ford, and Lockheed Martin flagged their concerns over the new regime in recent investor calls. Tesla’s CEO Elon Musk said during a recent briefing that China asked Tesla to guarantee its rare earth magnets for robot arms wouldn’t be used for military purposes. “That is an example of a challenge there. I’m confident we’ll overcome these issues,” he said.

Some are calling out the lack of preparedness by affected companies, including one unnamed European executive in China who told the paper that “what I’m witnessing on the ground is that there is really incompetence.” The executive explained that companies “underestimated what the impact would be and what you would need to prepare at the working level.”

Military-use bans — and confusion about how to confirm end use — are adding to the bottlenecks. One company running into difficulty is India’s Mahindra Group, with the company’s auto chief Rajesh Jejurikar saying that the process for obtaining end-use certifications — meant to confirm civilian use only — is still “not clear at the moment.”

Insiders are saying that this may be seen as a wake up call for the West to reduce its rare earth reliance on China, especially with the pause in US-China trade war escalations thought to be temporary at best. In the same way that stringent US tech export restrictions to China pushed the world’s factory to localize high-tech production and become an industry leader in only a matter of years, China leveraging its dominance in the rare earths supply chain could see new supply chains developed to serve Western markets.

MARKETS THIS MORNING-

Asian markets are in the red in early trading this morning. Japan’s Nikkei is looking at losses of 0.5%, Korea’s Kospi is down 0.9%, the Shanghai Composite and the Hang Seng are also in the red, down 0.1% and 0.6%, respectively.

THE CLOSING BELL-

The ADX rose 0.3% on Friday on turnover of AED 1.4 bn. The index is up 2.5% YTD.

In the green: Al Khaleej Investment (+5.8%), Hayah Ins. Company (+3.5%) and Gulf Medical Projects Company (+3.4%).

In the red: Ras Al Khaimah National Ins. Co (-10.0%), Emirates Ins. Co (-8.8%) and Rak Co. for White Cement and Construction Materials (-4.3%).

Over on the DFM, the index rose 1.1% on turnover of AED 733.6 mn. Meanwhile, Nasdaq Dubai was up 1.2%.