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

China’s exports of rare-earth magnets to the United States in June surged more than seven times from the prior month, as American firms clamor to get hold of the critical elements following a preliminary Sino-U.S. trade deal.

In April, Beijing placed restrictions on several critical magnets, used in advanced tech such as 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, as well as a similar hold on the refining of rare-earth elements, which are used to make magnets. 

The U.S. received about 353 metric tons of rare-earth permanent 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 year.

The U.S. was the second-largest destination for China’s rare-earth magnets, behind Germany, as 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 permanent magnets globally last month, up nearly 160% from May, but 38% lower compared with the same period last year.

The growth in exports came after Washington and Beijing agreed last month on a trade framework that included easing controls on Chinese rare-earth exports as well as 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 companies’ business in China had also been rolled back.

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

If exports continue to increase, it will be of great benefit to companies that have been suffering from shortages of magnets due to the lengthy time required to secure export licenses. For example, several European auto-parts suppliers were forced to halt production in recent months. 

The magnet shortages had also hit emerging industries such as 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 ways to support domestic mining of the minerals. 

However, experts say that setting up alternatives to China’s rare-earth magnet supply chain could take years, as it requires an intricate process of rare-earth element refining and separation. 

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

One way that the U.S. has been trying to compensate for lack of rare-earth magnets is through increased recycling. Apple and miner MP Materials announced a $500 million deal last week for the development of a recycling facility that will 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 reflection of just how much leverage China has in its trade relationship with the United States, speaking on CNBC’s “China Connection” on Monday.