BEIJING – Chinese rare earth magnet producers have been facing heightened scrutiny and delays in obtaining export licenses since September, well before Beijing’s formal move last week to expand controls over the critical minerals, according to industry sources.
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| Workers transport soil containing rare earth elements for export at a port in Lianyungang, Jiangsu province, China October 31, 2010. REUTERS/Stringer |
The tougher, longer review process for magnet manufacturers raises fresh questions about whether China, the world's dominant supplier, is moving to restrict shipments—potentially contradicting a May trade truce with the United States. The slowdown suggests a strategic effort to tighten its grip on products essential for both commercial and military technology.
According to two sources with direct knowledge of the matter, the process of applying for export permits became significantly more difficult starting in September. One of the sources noted that applications are now being returned more frequently with demands for additional information.
The second source stated that approvals are taking longer, often pushing the 45-working-day limit set by the Ministry of Commerce. They described the current level of scrutiny as similar to that seen in April during the peak of the trade war, when prolonged waits for licenses led to magnet shortages that forced shutdowns at international auto plants.
The sources declined to specify the exact approval times or provide details on the new questions being asked by regulators, requesting anonymity due to the political sensitivity of the issue in China.
China's Ministry of Commerce did not respond to a faxed request for comment from Reuters regarding the license approvals.
The increased difficulty is reflected in official data released Monday, which showed China's overall rare earth exports plunged by 31% in September. While the data does not break down the figures by product, the timing is telling.
"It's not a surprise to see exports falling in September because it became much harder to get new licenses last month," one of the sources said.
After slumping in April and May, rare earth magnet exports had recovered through June, July, and August. The specific data for September magnet exports will be released later this month.
China is the world's leading supplier of rare earths—a group of 17 elements crucial for products ranging from electric vehicles and wind turbines to military radar systems—and tightly controls their export through a licensing system.
Beijing officially expanded these controls last week, sparking outrage in the United States where President Donald Trump threatened retaliatory tariffs, though he later adopted a more conciliatory tone.
The formal announcement has triggered a wave of inquiries from foreign customers, who are now scrambling to ship their orders before the new regulations take effect on November 8, both sources said.
Adam Dunnett, Secretary General of the EU Chamber of Commerce in China, confirmed that the top concern for members remains the backlog of rare earth product license applications awaiting approval. He added that the Chamber has seen both approvals and delays for its members in recent weeks.
"We can't say that we've seen a decrease in the level of anxiety or concern," Dunnett said. "Some companies have had to endure long waiting times without any feedback as to why that is."