As President Trump prepares to meet China’s top leader at a summit in Beijing this week, one of the most pressing issues facing the United States, the European Union and Japan lies in China’s restrictions on exports of rare-earth metals and magnets essential to advanced manufacturing.
Manufacturers of commercial aircraft, electronics, cars, semiconductor manufacturing equipment and military hardware are facing acute shortages of rare earths, many of which are refined almost exclusively in China. Prices for some of these metals have soared as much as a hundredfold since Beijing halted most exports in early April last year.
China announced on Oct. 9 that it planned to impose sweeping new restrictions on exports of rare earths and products containing even trace amounts of Chinese rare earths. Three weeks later, Xi Jinping, China’s top leader, agreed at a meeting with Mr. Trump to postpone those measures for a year, though the restrictions issued in April remained in place.
A senior administration official said Sunday that the United States was in frequent contact with China about rare earths, and that it remained unclear whether this week’s summit would produce an agreement to extend the one-year reprieve. But the official, speaking on the condition of anonymity before the diplomatically sensitive meeting, said he was confident the two sides would reach an extension before the postponement expired.
Beijing has offered few hints about its intentions. Asked about rare earths at a news briefing last month, Mao Ning, a Chinese Foreign Ministry spokeswoman, said that “the two sides need to jointly deliver on the important common understandings between the two presidents, and provide greater stability to China-U.S. economic and trade cooperation.”
Business groups are pressing for immediate clarity, warning that Beijing’s restrictions are already disrupting manufacturing outside China and that companies need time to get ready for any tougher measures.
“How do you prepare? We simply don’t know what’s going to happen,” said Jens Eskelund, president of the European Union Chamber of Commerce in China, at a news briefing in Beijing last month.
The American Chamber of Commerce warned in a report released Monday that the rare-earth restrictions were part of a broader effort by China to tighten its grip on global supply chains.
“As China’s control over critical inputs and technologies expands, so, too, does its ability to weaponize this leverage,” the report said.
China’s Ministry of Commerce has said the export-license requirements it imposed last spring on seven categories of rare earths and related magnets are not intended as a tool for leverage in trade or geopolitical disputes, but are necessary because the materials have both military and civilian applications.
But Beijing announced the licensing rules just two days after Mr. Trump imposed steep “Liberation Day” tariffs on China and other countries. China has also linked its control over rare earths to demands that the European Union ease its tariffs on imported Chinese electric vehicles. And after a dispute with Japan over Taiwan in November, Beijing tightened limits on rare-earth shipments to Japan.
Even without the postponed additional restrictions, China has severely reduced exports of rare earths such as samarium, yttrium and dysprosium, which are already in critically tight supply outside China. Samarium, used in commercial aircraft, fighter jets and missiles, sells for about $2 a kilogram inside China but $50 to $500 a kilogram abroad, depending on the level of processing.
China has all but stopped exporting it.
“The aerospace industry is in critical need of samarium,” said Ilya Epikhin, a senior rare-earths specialist at the consulting firm Arthur D. Little. ”It can significantly impact the commercial aircraft production.”
In a statement, Airbus said it “does not buy rare earths or magnets directly, but they are used in our supply chain and we are closely engaging with our suppliers to ensure resilience.” Boeing said that it was working with its suppliers and that it did not see “a near-term impact.”
Yttrium is also scarce outside China, although industry specialists said Beijing had allowed a few shipments to the United States in recent weeks. The Chinese authorities have not explained the decision, which has been interpreted either as a good-will gesture before the summit or a delayed result of China’s pledge in October to permit some exports.
Yttrium is prized as a heat insulator. It is used in semiconductor manufacturing equipment to prevent excess heat from leaking between the tightly packed lasers that cut computer chips, and in jet engines and missiles to shield electronics and other systems from extreme heat.
Dysprosium is widely used in magnets for automotive systems, including brakes, steering and electric motors, as well as drones, including military models. China has restricted exports of dysprosium, which sells for about $200 a kilogram domestically but commands far higher prices overseas, according to Argus Media, a London-based commodity market data firm.
MP Materials, which owns the only rare-earths mine in the United States at Mountain Pass, Calif., said on its earnings call last week that it had begun work on the initial stages of refining the types of rare earths that China had restricted. The company currently produces easier-to-process rare earths at its Mountain Pass mine and refinery.
James Litinsky, MP’s chairman and chief executive, said in an interview that the company would not make the substantial investments needed for the later stages of purifying rare earths, such as yttrium, without long-term purchase commitments from customers. Western manufacturers, however, have been reluctant to sign contracts for fear that China could resume exports of far cheaper material.
Chinese refineries retain a major cost advantage because they process enormous volumes of rare earths each year, much of them used for electric car production. This gives them economies of scale.
Beijing also has some reasons to continue postponing expanded restrictions, which are slated to take effect in November and December. Two weeks after the U.S. midterm elections on Nov. 3, the presidents, prime ministers and other leaders of 21 Asian and Pacific economies are set to gather in Shenzhen, a Chinese metropolis next to Hong Kong, for their annual summit. Chinese officials may not want that meeting overshadowed by global economic difficulties tied to China’s export controls.
If Mr. Trump and Mr. Xi fail to reach an agreement this week, they may have another chance in the coming months. Officials have discussed a possible visit by Mr. Xi to the United States this year to reciprocate Mr. Trump’s trip to China.
Ruoxin Zhang contributed research.
Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He lived and reported in mainland China through the pandemic.
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