China's rare earths are flowing again, but not freely
FROM 'FULL PANIC' TO 'BARE MINIMUM'
(You can now subscribe to our
(You can now subscribe to our Economic Times WhatsApp channel
The threat of mass shutdowns across the automotive supply chain is fading as Chinese rare earth magnets begin to flow, though automakers and suppliers say production plans still face uncertainties and a continued risk of shortages.European suppliers have received enough licences to avoid the widespread disruptions predicted earlier this month but hundreds of permits remain pending, said Nils Poel, head of market affairs at supplier association CLEPA.The rate of issuance is "accelerating" and has risen to 60% from 25%, he said, but cases where the end users are based in the United States, or where products move through third countries like India, are taking longer or not being prioritised."Overall the feeling is that we probably will still have production in July and that the impact will be manageable," he said."Maybe here and there a production line will be affected, but we have avoided that for the moment." Volkswagen said in a statement to Reuters its supply of rare earth components was stable while rival Stellantis said it had addressed its immediate production concerns.China restricted exports of seven rare earths and related magnets in April in retaliation for U.S. tariffs.Three months later there remains huge uncertainty about how it intends to police its opaque and complex export licensing system Since the restrictions were imposed, rare earth magnet exports from China have fallen roughly 75%, forcing some automaker production lines to halt in Asia, Europe and the United States.The White House said on Thursday it had signed a deal with China to speed up rare earth approvals without providing details. Beijing said hours later both parties had confirmed details of the deal struck in London earlier this month, which was meant to resolve the rare earth issue, and it would process export licences in accordance with the law.Neither party detailed any changes to the existing export licensing system.U.S. Treasury Secretary Scott Bessent said in an interview with Fox Business Network on Friday that, under the agreement announced on Thursday, rare earth shipments to the United States from China would be expedited to all companies that have previously received them on a regular basis."I am confident now... the magnets will flow," Bessent said. "This is a de-escalation."Two weeks ago the car industry was in a "full panic," but licence approvals by China have sped up and there is now less threat of a sudden stop, according to an executive at a leading U.S. automotive supplier and a source with knowledge of the supply chain at a major European carmaker. Both asked not to be named because of the sensitivity of the issue.China is approving the "bare minimum" of critical licences for European firms to avoid production stoppages, a European official told Reuters, also speaking on condition of anonymity.U.S. magnet maker Dexter Magnetic Technologies, which has defence clients, among others, has received just five of 180 licences since April, CEO Kash Mishra told Reuters, adding those were intended for non-defence sectors."It's an extended delay," he said. "It's 45 days trying to get the paperwork right for the supplier, and then it's 45 more days or so before any licences are granted."
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
&w=3840&q=100)
Business Standard
23 minutes ago
- Business Standard
China shows signs of tackling price wars taking toll on its EV industry
China's industrial policy has engineered a remarkable transformation to electric vehicles in what is the world's largest auto market AP Beijing The Chinese government is signalling enough is enough when it comes to the fierce competition in the country's electric car market. China's industrial policy has engineered a remarkable transformation to electric vehicles in what is the world's largest auto market. In so doing, it has spawned far more makers than can possibly survive. Now, long-simmering concerns about oversupply and debilitating price wars are coming to the fore, even as the headline sales numbers soar to new heights. Market-leader BYD announced this week that its sales grew 31 per cent in the first six months of the year to 2.1 million cars. Nearly half of those were pure electric vehicles and the rest were plug-in hybrids, it said in a Hong Kong Stock Exchange filing. The company phased out internal combustion engine cars in 2022. BYD came under thinly veiled criticism in late May when it launched a new round of price cuts, and several competitors followed suit. The chairman of Great Wall Motors warned the industry could come under threat if it continues on the same trajectory. When volumes get bigger, it's just much harder to manage and you become the bullseye, said Lei Xing, an independent analyst who follows the industry. The government is trying to rein in what is called involution a term initially applied to the rat race for young people in China and now to companies and industries engaged in meaningless competition that leads nowhere. BYD has come under criticism for using its dominant position in ways that some consider unfair, sparking price wars that have caused losses across the industry, said Murthy Grandhi, an India-based financial risk analyst at GlobalData. With the price war in its fourth year, Chinese automakers are looking abroad for profits. BYD's overseas sales more than doubled to 464,000 units in the first half of this year. Worried governments in the US and EU have imposed tariffs on made-in-China electric vehicles, saying that subsidies have given them an unfair advantage. Market leader BYD comes under attack The latest bout of handwringing started when BYD cut the price of more than 20 models on May 23. The same day, the chairman of Great Wall Motors, Wei Jianjun, said he was pessimistic about what he called the "healthy development of the EV market. He drew a comparison to Evergrande, the Chinese real estate giant whose collapse sent the entire industry into a downturn from which it has yet to recover. "The Evergrande in the automobile industry already exists, but it is just yet to explode, he said in a video message posted on social media. Two days later, a BYD executive rejected any comparison to Evergrande and posted data-filled charts to buttress his case. To be honest, I am confused and angry and it's ridiculous! Li Yunfei, BYD's general manager of brand and public relations, wrote on social media. All these come from the shocking remarks made by Chairman Wei of Great Wall Motors. Next, the government and an industry association weighed in. The China Association of Automobile Manufacturers called for fair competition and healthy development of the industry, noting that major price cuts by one automaker had triggered a new price war panic. On the same day, the Ministry of Industry and Information Technology vowed to tackle involution-style competition in the auto industry, saying that recent disorderly price wars posed a treat to the healthy and sustainable development of the sector. That price cut might have been the final straw that irked both competitors and regulators for the ruthlessness that BYD continues to show, Lei said. A promise to pay suppliers within 60 days signals possible shift The following month, 17 automakers including BYD made a pledge: They would pay their suppliers within 60 days. One way China's automakers have been surviving the bruising price wars is by delaying the payments for months. The agreement, if adhered to, would reduce financial pressure on suppliers and could rein in some of the fierce competition. The introduction of the 60-day payment pledge is the call of the government to oppose involution-style competition," said Cui Dongshu, the secretary-general of the China Passenger Car Association. It also reduces the risk of an Evergrande-like scenario. Many automakers had stretched out payments by paying suppliers with short-term debt promises to repay them in a certain period of time instead of cash. Real estate developers used the same system. It worked until it didn't. When Evergrande defaulted on its debts, suppliers were left holding worthless promises to pay. This practice is seen as a potential cause of a larger crisis, similar to what happened with Evergrande, Grandhi said. The vows to speed up payments and the government calls to rein in the price wars, along with a rollback of some financing offers, point to an effort to reverse downward price expectations, said Jing Yang, a director at Fitch Ratings who focuses on the auto industry. We may watch how effectively these measures are in reversing the price trend and how would that affect EV demand in the coming quarters, she said. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
&w=3840&q=100)
Business Standard
24 minutes ago
- Business Standard
Trump's Vietnam deal signals China tariffs unlikely to ease further
Chinese goods face 55% tariffs, likely through August. Under the Vietnam deal, the US will impose 20% tariffs on Vietnamese exports and 40% on transshipped goods to curb Chinese tariff evasion Bloomberg President Donald Trump's new trade deal with Vietnam sends a clear signal about where US tariffs on Chinese goods might ultimately land, as talks between Washington and Beijing continue following their recent truce. Chinese goods currently face tariffs of around 55 per cent, a level expected to remain through August. But under the latest Vietnam agreement, the US will slap a 20 per cent tariff on Vietnamese exports to the US and a steeper 40 per cent levy on goods deemed to be transshipped — the latter targeting a well-worn backdoor used by Chinese exporters since the first China-US trade war to dodge American tariffs. By closing the loopholes, the Trump administration is signaling what any future deal with China might look like. The 40 per cent tariff on transshipped goods suggests that even if tariffs on China are eventually reduced, they're unlikely to fall significantly below that threshold. 'The 40 per cent figure in the Vietnam deal might reflect a broader conviction in the Trump administration about the appropriate tariff level on China, which would be similarly reflected in other bilateral deals,' said Gabriel Wildau, a managing director at Teneo focused on political risk analysis in China. 'However, I am skeptical that Trump has a specific red line for minimum tariffs on China.' Beijing and Washington reached a trade framework last month following talks in London, which remains in effect through mid-August. As part of the deal, China agreed to resume shipments of rare earths — key inputs for wind turbines, electric vehicles and military hardware. In return, the US offered to ease some export restrictions on ethane, chip-design software and jet engine components. US tariffs on Chinese goods have been cut back to around 55 per cent, down from as high as 145 per cent in early April. But 20 per cent tariffs tied to fentanyl remain in place. Beijing has since tightened controls on two precursor chemicals used to make the drug — one of the few obvious avenues it has to win further tariff relief. 'The 20 per cent is really the focal point where all the attention is centered right now,' said Christopher Beddor, deputy China research director at Gavekal Research. 'The thinking is that the Chinese government is very willing to do a deal on something related to fentanyl. They've been telegraphing that for months.'' Still, those efforts are unlikely to bring Chinese tariffs below the 40 per cent rate now applied to Vietnam. If China's duties were to fall to 35 per cent, for instance, it would restore a competitive edge to China and encourage firms to shift operations back, running counter to the Trump administration's broader objectives. 'If China ends up with a lower tariff level than Vietnam that would certainly shift the competitiveness calculations somewhat, but keep in mind that moving production facilities is not as easy as flipping a light switch on and off,' said Stephen Olson, a former US trade negotiator now with the ISEAS-Yusof Ishak Institute. 'From the perspective of Chinese companies, there is zero confidence that once Trump sets a tariff level that it will remain at that level.' For now, there are signs both sides are following through on the terms of the London agreement and displaying signs of goodwill. The Trump administration has lifted recent export license requirements for chip design software sales in China, and approved US ethane exports to China without additional approvals. Treasury Secretary Scott Bessent said Chinese rare earth magnets are flowing, although they haven't yet bounced back to the levels seen before China imposed export curbs in early April. The US remains hopeful that China will further ease restrictions on those exports after their London deal, he said in an interview Tuesday on Fox News. Meanwhile, a senior Chinese official on Thursday delivered one of Beijing's most positive messages about his nation's ties with the US in weeks. Liu Jianchao, head of the Communist Party's International Department, said at the World Peace Forum that he was 'optimistic' about future relations. China is keenly aware of what it's gained from China-US cooperation,' Liu said 'Our cooperation is mutually beneficial. The act of putting up barriers will hurt the other and ourselves as well.' Other negotiations Apart from Vietnam, Beijing is growing increasingly cautious about US efforts to strike trade deals that could isolate China. With a July 9 deadline approaching, when Trump's higher 'reciprocal' tariffs are set to take effect, American officials are ramping up negotiations with key partners in Asia and Europe. What Bloomberg Economics says... 'The looming question now is how China will respond. Beijing has made clear that it would respond to deals that came at the expense of Chinese interests and the decision to agree to a higher tariff on goods deemed to be 'transshipped' through Vietnam may fall in that category. Given China's position as Vietnam's largest trading partner and key source of inputs for domestic production, any retaliatory steps could have an outsized impact on Vietnam's economy.' — Rana Sajedi and Adam Farrar. Click here to read the full report. Beijing on Thursday said it's taken note of the US-Vietnam trade deal and is currently assessing the situation. 'We're happy to see all parties resolve trade conflicts with the US through equal negotiations, but firmly oppose any party striking a deal at the expense of China's interests,' He Yongqian, a spokesperson for the Ministry of Commerce, said at a briefing. 'If such a situation arises, China will firmly strike back to protect its own legitimate rights and interests,' she added, repeating a familiar warning. Olson cautioned against relying too much on the US-Vietnam trade agreement as a blueprint for assessing Washington's approach to China. The stakes in US-China negotiations are significantly higher, shaped by strategic rivalry and a wider set of geopolitical considerations. There is also much less of a power discrepancy in the US-China discussions. 'One important takeaway for China from both the Vietnam deal and the previous deal with the UK is that the US intends to use these negotiations to apply pressure on China,' Olson said. 'This could lead China to a much more sober assessment of what it might be possible to achieve with the US in these negotiations.'
Time of India
27 minutes ago
- Time of India
Bajaj, Ather, TVS to cut output amid rare earth magnet shortage on China restrictions
India's top electric two-wheeler makers, including Bajaj Auto , Ather Energy and TVS Motor Company , are set to cut production this month due to a prolonged disruption in the supply of heavy rare earth (HRE) magnets from China. The shortage, now in its fourth month, is threatening to slow the sector's rapid growth, industry executives said. Bajaj Auto , India's second-largest EV two-wheeler maker, is likely to halve its output, while Bengaluru-based Ather Energy plans to scale down production by 8-10 per cent , people familiar with the developments told ET. TVS, which has topped sales for three consecutive months, is also expected to pare production. All three firms are grappling with the shortage of HRE magnets, critical for electric traction motors. "The disruptions in the EV supply chain, particularly concerning magnet availability, continue to pose challenges in the short to medium term," a TVS Motor spokesperson said. "We are working actively to mitigate the prevailing challenges." Former market leader Ola Electric, however, said it will maintain production uninterrupted, having stockpiled rare earth magnets ahead of time. "There is no impact on production because of the rare earth magnets," an Ola Electric spokesperson said, declining to elaborate further. These four firms account for eight out of every ten e-two wheelers sold in the local market. "We've started to see some production disruption on the Chetak line," said Rakesh Sharma, executive director at Bajaj Auto. "Our R&D and procurement teams are working on alternatives, which are now in advanced stages of development," he said. An email sent to Ather remained unanswered until press time Thursday. The automobile industry and the central government have been holding discussions with Chinese authorities to restore supplies of rare earth elements (REEs) and magnets and also have initiated negotiations with alternative suppliers like Vietnam, Indonesia and Japan. However, the shortage is persisting. "There has been no progress on resuming magnet imports from China," said a senior industry executive. "TVS, Bajaj, and Ather are the first to be hit, but the entire segment could face disruption if the issue drags on." In June, the Society of Indian Automobile Manufacturers (SIAM) had warned that if supplies did not resume soon, manufacturers could be forced to scale back output due to dwindling inventories. "If the current standoff continues, the EV sector's momentum could lose steam just as it begins to scale up," a top executive at a leading original equipment maker (OEM) told ET on condition of anonymity. The challenge comes at a time when the electric two-wheeler market continues to gain traction. Their sales surged 34 per cent year-on-year in the first quarter of FY26 to about 298,000 units, according to data from the government's Vahan portal. Meanwhile, Ola has an inventory of rare earth magnet to last at least five to six months and it's also working on alternate supply chain solutions, people aware of the company's plans said. The company may even marginally increase production in July, they said. A lesser impact on Ola also comes against the backdrop of the company's underperformance. Ola Electric slipped to third place in June for the second straight month.
