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China's rare Earths are flowing freely again, but at a price

Chinese rare earth magnets are now flowing into the automotive supply chain, reducing the threat of mass closures. However, automakers and suppliers still say that production plans face uncertainty and there is a risk of shortages.

Nils Poel is the head of market affairs for supplier association CLEPA. He said that European suppliers received enough licenses to prevent widespread disruptions earlier this month. However, hundreds of permits are still pending.

He said that the rate of issuance has "accelerated" from 25% to 60%, but in cases where end users are located in the United States or products are transported through third countries such as India, it takes longer or is not given priority.

He said that he felt that production would probably continue in July, and the impact of the shutdown will be manageable.

"We have managed to avoid that at the moment."

Volkswagen stated in a press release that its supply of rare-earth components is stable, while Stellantis claimed to have addressed immediate production concerns.

In April, China restricted the exports of magnets and rare earths.

Even three months after the announcement, there is still a lot of uncertainty regarding how the government intends to enforce its complex and opaque export licensing system.

Since the restrictions, exports of rare earth magnets from China are down by about 75%. This has forced some automakers to stop production in Asia, Europe, and the United States.

From 'Full Panic' to 'Bare Minimum'

The White House announced on Thursday that it had reached an agreement with China in order to expedite rare earth approvals, but did not provide any details. Beijing announced that both parties confirmed the details of the agreement struck in London in early this month. The deal was intended to resolve the issue with rare earths. It would then process export licenses according to the law.

The existing system of export licenses was not altered by either party.

In an interview with Fox Business Network, U.S. Treasury Sec. Scott Bessent stated that under the agreement announced Thursday, all companies who have received rare earth shipments from China on a regular schedule would receive them expedited.

Bessent stated, "I'm confident that the magnets are going to flow." This is a deescalation.

According to a senior executive of a major U.S. auto supplier and an expert in the supply chain of a major European carmaker, the industry was in "full panic" two weeks ago. However, the approvals of licences from China have increased and the threat of a sudden halt is lessened. The two declined to be identified due to the sensitive nature of the matter.

Unnamed European official said that China approves the "bare minimal" of licenses critical to European firms in order to prevent production stops.

Kash Mishra, CEO of Dexter Magnetic Technologies in the U.S., said that only five licenses have been issued to this magnet manufacturer since April. These were for sectors other than defence.

He said, "It is a long delay." It takes 45 days to complete the paperwork for the supplier and another 45 days before the licences are issued. (Reporting from Christina Amann, Giulio Pieovaccari, Laurie Chen, Beijing, and Vidyarajagopal, with additional reporting from Kalea, Hall, Guillaume, Nick Carey, in London, Paris, and Ann Arbor; editing by Jason Neely).

(source: Reuters)