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China's new tracking system increases scrutiny of rare earth magnets

Three sources confirmed that China has implemented a tracking system in its rare earth magnet industry, as export restrictions are beginning to isolate customers from around the globe.

Two sources briefed on the issue and two others familiar with it said that the national tracking system went into effect this week and requires producers to provide extra information online, including trading volume and client names.

China, the world's biggest rare earth magnet exporter and supplier, in April, placed export restrictions on several magnets and seven medium-to-heavy rare earth elements. Exporters were required to obtain licenses.

The delays in getting approvals has disrupted supply chains, affecting automakers, semiconductor firms and others. Global automakers have already begun to shut down some production lines, as they run out of reserves.

Beijing announced high-level plans in June to create an information tracking system for rare earths products. However, the subject was not mentioned again until this week, according to a source familiar with the issue.

China's export restrictions on rare earths, magnets, and other products - in which it has a near monopoly - may become permanent.

In the U.S., and elsewhere, there was hope that this would be eliminated as part of the trade truce reached in Geneva last week.

Exports tend to gradually rebound in cases where China has placed export restrictions on metals. This is because exporters have applied for and received licences.

Tim Zhang, the founder of Edge Research in Singapore, said: "Our current hypotheses is that China will continue to control its exports on rare earths as it's an ace card China can hold."

Beijing's goal is to strengthen its control of the sector and crackdown on illegal mining, smuggling and tax evasion. A fourth source, who was also briefed about the issue, said that Beijing has a long-term plan to track all rare earth production chains, not just magnets.

(source: Reuters)