China’s tight restrictions on rare earth exports have significantly boosted the country’s magnet manufacturing sector. The original export controls were enacted to control the global supply of strategically important and economically vital materials. They have changed the competitive market landscape and brought enormous pressure on foreign companies who want access to these critical resources.
Over the past decade, China has come to monopolize the international rare earth supply chain. Yet, it now controls about half of the entire world’s supply. In response, the national government has placed heavy export quotas and tariffs. Consequently, foreign producers now face a crunch in their ability to source these critical materials. In turn, domestic firms have reaped the reward, adding to their own production capacity for increased competitiveness.
Chinese manufacturers have been very strategically stateside in how they’ve concentrated their growth. They have spent millions of dollars in technology and infrastructure, powering this explosive growth. These companies are the true innovators — developing game changing technologies and improving production processes. Consequently, they are able to regularly manufacture world-class magnets that exceed stringent global standards. Domestic manufacturers are stepping up to the plate to serve this exploding demand for magnets. Interest from industries ranging from electric vehicles to renewable energy technologies to consumer electronics are fueling this surge.
The ramifications of these developments have implications beyond China’s borders. Foreign businesses that rely on rare earth materials are facing more and more hurdles. On top of that, they need to contend with the realities of a market largely shaped by Chinese protections. New research commissioned by UK Trade & Investment industry experts forecasts that international companies will have to look at different supply chains. They might pursue building up production capacities in their own home countries to offset risks associated with China’s export controls.
Further, the changes in the magnet manufacturing landscape have raised alarm bells among policymakers in other countries. Countries that depend on Chinese rare earths to power their industries are in the midst of responding. They are restructuring how and where they source these critical materials. Many areas are currently taking steps to develop their own independent, domestic supply of rare earths. Along with investing in emerging recycling technologies to help reduce our reliance on imports.
Chinese authorities have repeatedly defended their use of export controls in a way designed to safeguard national security and economic stability. The government argues that by managing exports, it can better protect its resources while promoting sustainable growth within its own manufacturing sector.