China's rare earth elements export restrictions hit the European automotive sector
As concerns about the damage caused by China's restrictions on critical mineral exports deepen, some European automakers are considering taking measures against the scarcity of rare earth elements.
In China's April, US President Trump's decision to suspend the export of a wide range of rare earth elements and related magnets against excessive tariffs shook the supply chains of vital importance for automakers, aerospace manufacturers, semiconductor companies and military contractors worldwide.
This move highlights China's dominance in the critical mineral industry, which is the key to the transition to green energy, and is seen as a trump card in China's trade war with the US. China produces about 90% of the world's rare earth elements.
In May, US automaker Ford had to stop production of the Explorer model at its Chicago factory for a few days.
European Union Trade Commissioner Maros Sefcovic said on Wednesday that they have agreed with their Chinese counterpart to clarify the issue of rare earth elements as soon as possible.
EU Industry Strategy Commissioner Stephane Sejourne said, "We must reduce our dependence on all countries, especially some countries such as China, where we depend more than 100%."
“Exports (restrictions) increase our desire to diversify,” Sejourne said after Brussels identified 13 new projects aimed at increasing the supply of metal and minerals.
Earlier on Wednesday, Mercedes-Benz production chief Joerg Burzer said he was in talks with the automaker's largest suppliers on creating “buffers” such as rare earth stocks to protect against possible threats to supply. Mercedes is not affected by the famine at the moment.
He said that part of the BMW supplier network was affected by the famine, but its own factories are operating normally.
The European automotive suppliers association CLEPA stated that several production lines were closed due to the depletion of supplies and warned of the increasing threat of controls to production.
CLEPA added that since the beginning of April, only a quarter of the hundreds of export license applications made by automotive suppliers have been accepted, while some applications have been rejected by the union's “high procedureal grounds”.
CLEPA, which did not disclose the names of the companies, warned that there may be new cuts.
Although China's announcement in April coincides with a broader package of retaliation against Washington's tariffs, measures are being implemented globally and raising concern among business executives around the world.
German and US automakers complained last week that the restrictions imposed by China threaten production, on a similar complaint from an Indian electric vehicle manufacturer.
Many are pressuring their governments to find a quick solution and striving to find alternatives.
Wolfgang Weber, CEO of Germany's electrical and digital industry association ZVEI, said in an email that some companies have supplies just enough for a few weeks or months.
“The companies now feel abandoned by politicians and are partly looking for solutions to their difficult situation in China on their own,” he said.
Swedish Autoliv, the world's largest airbag and seat belt manufacturer, has announced that its activities have not been affected, but CEO Mikael Bratt has said it has set up a task force to manage the situation.
It is also reported that there have been unusual attempts in the US to obtain urgently needed rare earth elements, or at least components produced from them. Accordingly, automotive manufacturers in particular began to consider shifting the production of related components to China or even sending parts such as electric motors to China almost finished, attaching magnets produced from indispensable rare earth elements there. These parts can then be sent back to Western countries.
DEPENDENCE ON CHINA
Automakers such as General Motors and BMW, and major suppliers such as ZF and BorgWarner, are exploring or developing engines with low or zero in rare earth content in order to reduce their dependence on China, but few have managed to scale production to reduce costs.
BMW has started using a magnet-free electric motor in its latest generation electric cars, but it still needs rare ground for smaller motors that run components like windshield wipers and car window cylinders.
German automaker Volkswagen has announced that it does not see any famine at the moment.
China's slowdown of critical mineral export controls after the US started a trade war became the focus of Trump's criticism of Beijing.
Trump is trying to redefine its trade relations with the U.S. major economic competitor by imposing high tariffs on billions of dollars of imported products in hopes of reducing the trade deficit and recovering the lost manufacturing industry.
Trump imposed tariffs on China up to 145%, but due to the extensive nature of these taxes, it withdrew taxes after the wave of sales in the stock, bond and foreign exchange markets. China responded with its own tariffs and is using its dominance over key supply chains to convince Trump to step back.
The US President says China violated the ceasefire agreement reached in Geneva last month to withdraw tariffs and trade restrictions. Beijing also accuses Washington of violation.
The Trump administration has escalated conflict with measures that Beijing describes as “over-repressure measures,” the threat to revoke the visas of Chinese students in the US and stop the sale of some key technologies related to the jet engine semiconductor design to China.
Trump and Chinese President Xi Jinping are expected to meet this week. [sic] The two leaders are expected to try to eliminate the differences between them and export restrictions are expected to be at the top of the agenda.
In a post he made on social media on Wednesday, Trump emphasized the fragility of the agreement, stating that Xi was "TOO HARD AND VERY DIFFICULT TO MAKE A DEAL".
The other option is to end the economic war
On the other hand, the end of the economic war against China may also be a way out: if North American and European countries lift export restrictions on China, they can hope to be exempted from Chinese restrictions in response to the West's economic war. However, in the current situation, such a step is not expected to be taken.
Industry representatives state that the EU can act on its own without consulting the US. For example, the Dutch company may lift the ban imposed on the export of state-of-the-art machines used in semiconductor production by ASML to China.
This will reduce the tension in the economic war. However, there is no sign that such a step will be taken within the EU.