U.S. firms scramble to secure rare-earth magnets

China’s exports of rare-earth magnets to america in June surged greater than seven times from the prior month, as American firms clamor to pay money for the critical elements following a preliminary Sino-U.S. trade deal.

In April, Beijing placed restrictions on several critical magnets, utilized in advanced tech equivalent to electric vehicles, wind turbines and MRI machines, requiring firms to receive licenses for export. The move was seen as retaliation against U.S. President Donald Trump’s steep tariffs on China. 

Beijing has a stranglehold on the production of rare-earth magnets, with an estimated 90% of the market, in addition to the same hold on the refining of rare-earth elements, that are used to make magnets. 

The U.S. received about 353 metric tons of rare-earth everlasting magnets in June, up 660% from the previous month, data released by China’s General Administration of Customs showed, though the exports were about half that from June last 12 months.

The U.S. was the second-largest destination for China’s rare-earth magnets, behind Germany, because it relies heavily on their imports for its large manufacturing sector, particularly automotive, electronics and renewable energy. 

In total, China exported 3,188 metric tons of rare earth everlasting magnets globally last month, up nearly 160% from May, but 38% lower compared with the identical period last 12 months.

The expansion in exports got here after Washington and Beijing agreed last month on a trade framework that included easing controls on Chinese rare-earth exports in addition to a rollback of some American tech restrictions for shipments to China. 

AI behemoth Nvidia said last week it was planning to resume shipments of its H20 AI chips to China, after the exports were restricted in April. Last month, controls on American AI chip software corporations’ business in China had also been rolled back.

Chinese rare-earth magnet producers began announcing the approval of export licenses last month.

If exports proceed to extend, it would be of great profit to corporations which have been affected by shortages of magnets resulting from the lengthy time required to secure export licenses. For instance, several European auto-parts suppliers were forced to halt production in recent months. 

The magnet shortages had also hit emerging industries equivalent to humanoid robotics. In April, Elon Musk said production of Tesla’s Optimus humanoid robots had been disrupted. 

China’s controls on its rare-earths sector have prompted some global governments to reexamine their rare-earth supply chains and search for methods to support domestic mining of the minerals. 

Nevertheless, experts say that establishing alternatives to China’s rare-earth magnet supply chain could take years, because it requires an intricate technique of rare-earth element refining and separation. 

“The separation process is kind of complex, and China has a whole lot of benefits on this after putting in many years of research into the processes,” Yue Wang, a senior consultant of rare earths at Wood Mackenzie, told CNBC last month. 

A technique that the U.S. has been attempting to compensate for lack of rare-earth magnets is thru increased recycling. Apple and miner MP Materials announced a $500 million deal last week for the event of a recycling facility that can reinforce the iPhone maker’s U.S. magnet supply chain.

Peter Alexander from financial consultancy Z-ben Advisors said that Washington’s latest concessions on tech restrictions were a mirrored image of just how much leverage China has in its trade relationship with america, speaking on CNBC’s “China Connection” on Monday.