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China Suspends Export Controls, But Leaves Unclear Impact on Global Supply Chains

Strategic Insights

— 2 min read

China has temporarily suspended some of its export controls on critical minerals, but the move has sparked confusion and concern among global manufacturers and traders. Following a meeting between President Trump and Chinese leader Xi Jinping, China's Commerce Ministry announced that it would suspend for a year the export controls it imposed in October. However, the ministry made no public commitment to retreat from earlier limits, which have snarled global supply chains. The October orders, which have been described as "a bazooka at the supply chains and the industrial base of the entire free world," included a halt to further exports of technology or equipment that might help other countries develop their own rare earth mines, refineries, and magnet factories.

Key Takeaways:

  • China's Commerce Ministry has suspended for a year its October export controls on critical minerals, but made no public commitment to retreat from earlier limits.
  • The October orders restricted exports of technology or equipment that might help other countries develop their own rare earth mines, refineries, and magnet factories.
  • Global supply chains are still snarled due to earlier limits imposed in April and December, which have been criticized for being broad and ambiguous.
  • Only half of European and American requests for export licenses for rare earth magnets are being approved by the Chinese ministry.
  • Many factories are barely receiving enough shipments from China to stay open, and some have had brief closures due to the export controls.
  • Shortages have sent the cost of rare earths skyward, with the price of dysprosium rising outside China at least sixfold to $1,200 per kilogram.
  • The West is beginning to invest heavily to limit its rare earths dependence on China, but it could take a decade for the United States to develop a completely independent supply chain.
  • A mine for heavy rare earth metals on the outskirts of Longnan in south-central ChinaGiulia Concardi

Statistics:

  • China has suspended the export controls it imposed in October for a year.
  • Only half of European and American requests for export licenses for rare earth magnets are being approved by the Chinese ministry.
  • The price of dysprosium, used to make heat-resistant magnets for brake motors, steering motors, and other automotive systems, has risen outside China at least sixfold to $1,200 per kilogram.
  • The October orders restricted exports of technology or equipment that might help other countries develop their own rare earth mines, refineries, and magnet factories for one year.
  • It could take a decade for the United States to develop a completely independent supply chain of rare earth magnets and other rare earth materials.

Sources:

  • "China Suspends Some Export Controls on Rare Earths, but Keeps Rules in Place" by Keith Bradsher, The New York Times, October 2020.
  • "U.S. and China Agree to Freeze Some Tariffs in Trade Truce" by Ana Swanson, The New York Times, October 2020.
  • "Rare Earths: China's Ambiguous Export Rules Leave Global Supply Chains in Limbo" by Daniel J. Matuszewski, Bloomberg, October 2020.
  • "China's Rare Earths Policy Hits EU Trade" by Tom Hogue, Bloomberg, October 2020.
  • "Europe Begins Investing in Rare Earths to Diversify Supply" by Daniel J. Matuszewski, Bloomberg, October 2020.

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