China earlier this year has introduced restrictions on rare earth exports. This decision marked a new stage in the American trade ship, when the two parties no longer tried to get rid of the other but took more concrete measures. The problem is that restrictions do not only apply to American companies. And they could well bring the mortal blow to the automotive industry in difficulty in difficulty.
China controls 90% of the treatment capacity of rare earths in the world. It is indisputable, if not exactly celebrated in the West, master of the rare earth industry. And now, he uses this position to take stock of the business partners who have gone beyond to restrict Chinese exports to their own country and regions – essentially the same thing as Washington when he uses the domination of the dollar to sanction the governments with which he is not seen.
Rare earths are used in a perhaps surprisingly large variety of products. More specifically, it was rare-trickered magnets that disturbed car manufacturers on both sides of the ocean. “Without reliable access to these elements and magnets, car suppliers will not be able to produce critical automotive components, including automatic transmissions, butterfly bodies, alternators, various engines, sensors, safety belts, speakers, engines, power steering and cameras”, alliance for automotive innovation, a body of industry, written in a letter sent to the Trump administration in early May.
The letter, quoted by Reuters in a recent report on rare Earths restrictions, is one of what looks like a cry of help that will only become stronger. It was signed by leaders in the automotive industry, notably Toyota, Volkswagen and General Motors, who thanked the administration for trying to solve the problem. If they did not do so, said car manufacturers, it would only be a matter of time before the car factories started to close.
Related: the return of Trump’s coal becomes global
The same thing happens in Europe, and it’s worse – because with Trump, American manufacturers no longer have to worry about electric vehicles. With the current European Parliament and the Commission, local car manufacturers must very much worry about electric vehicles. Because electric vehicles have larger quantities of these rare land than internal combustion engine cars. And European car manufacturers have been mandated by the production and sale of certain minimum numbers of these electric vehicles over the next three years.
“I informed my Chinese counterpart of the alarming situation in the EU automotive industry – rare earths and permanent magnets are essential for industrial production … This is extremely disruptive for industry,” said the European Union trade commissioner, Maros Sefcovic, said this week as this week, as this week, as this week, as this week, quoted by financial time. He added that “car manufacturers warn enormous production difficulties in a short time”.
In other words, the clock and China does not really seem in a hurry to stop it. The restrictions that Beijing puts implemented in mid-April are not literal or direct. They are in the form of a new license regime for all those who wish to buy rare earth magnets from Chinese producers. To do this, the potential buyer must request a license, provide a substantial amount of information and wait. As a spokesperson for Bosch described, the request process was “complex and long, partly due to the need to collect and provide a lot of information”.
Due to this complexity, only a few suppliers of automotive parts have obtained such licenses, which means that car manufacturers were no longer part of the time. But this happens at a very bad time for European car manufacturers, despite the substantial increase in sales of electric vehicles. They still have to shoot a solid profit on their electric cars and they are supposed to make more and more – which means many more rare earths.
Things are not a swell in the United States either, after President Donald Trump accused the Chinese of raping an agreement that the previous two agreed, on the temporary relaxation of the trade war, including prices and other commercial restrictions-to be brought back to the accusation he did first, restricting semiconductor exports.
Things do not seem good for the automotive industry at the moment, but there is, as always, a silver lining. It consists in the fact that the world depends entirely on a single source of rare land and that it is not a lasting or secure state of affairs. There have been a lot of discussions in Europe and the United States to build their own supply chains in such critical materials, but the action was not really to come. Even if that was the case, the construction of a supply chain from zero takes many years – just asking China. However, the rare Earths drama can stimulate the determination of Europe to start working on this supply chain, as long as it does to build it. Import dependence can be fatal.
By Irina Slav for Oilprice.com
More top readings of OilPrice.com
