China's Rare Earth Export Restrictions Slash Magnet Exports by 75%

China's dominance in the rare earth supply chain has historically given it significant leverage over global markets. However, recent export restrictions have had a lasting negative impact on the sector. Chinese magnet producers are now grappling with mounting inventories, a struggling economy, and waning demand for electric vehicles (EVs).

China's rare earth export restrictions, implemented in April as a retaliation against U.S. tariffs, have severely affected domestic magnet manufacturers. Many of these manufacturers were already struggling with a weak economy and declining demand from EV makers. Rare earth magnets are crucial for electric vehicles, wind turbines, and various high-tech applications, with China producing around 90% of the world’s supply.

Public filings from the 11 largest listed Chinese magnet producers reveal that exports accounted for 18% to 50% of their 2024 revenues, highlighting the sector’s reliance on international customers. The short-term fallout has been severe, with magnet exports dropping by 75% within two months of the restrictions. Some global automakers were forced to pause production as a result.

Meanwhile, inventory has been piling up in domestic warehouses as producers await export licenses. This has created a situation where sales are being squeezed from both ends—disrupted exports and flagging domestic demand. Some small and mid-sized producers responded by cutting production by 15% in April and May, but for many, this was not enough to avert what was described as a “crisis” for local magnet makers.

Even though the U.S. and China announced a deal on June 27 to reverse the export restrictions, the damage has already been done. The Baotou Rare Earth Products Exchange warned that any resumption of normal export activity would take time, as inventory levels remain high and licensing requirements continue to delay shipments. The challenge is compounded by the specialized nature of magnet products, many of which are tailor-made for specific clients and cannot be easily resold within China, forcing companies to store finished goods while they await the necessary licenses.

Export curbs on germanium and antimony imposed in 2023 and 2024 still haven’t fully recovered. This has already impacted lead-acid battery production, particularly in the automotive sector. The licensing process has been described as both opaque and burdensome, further complicating recovery efforts. The increased pressure could spur consolidation among the hundreds of manufacturers that populate China’s rare earth sector, which may not be a bad outcome for Beijing.

Industry analysts and insiders speculate that the increased pressure could spur consolidation among the hundreds of manufacturers that populate China’s rare earth sector, which may not be a bad outcome for Beijing. “I do not know if Beijing sees that as a bad thing, because further consolidation is helpful for controlling and understanding where materials go,” said an industry expert. Two rare earth magnet manufacturers expect significant revenue declines this year, although they didn’t offer exact forecasts. “The impact on our export business will be huge, although it’s hard to tell exactly how much loss we will suffer,” said one of the producers.

In April, share prices of listed magnet producers fell sharply following the export restrictions, but they have recovered somewhat in recent months. However, the rebound is not based on any tangible improvement in the business outlook. “I can see various market outlooks, more or less negative depending on the assumptions, but none of them yield a sustainable rise in share price like we’re seeing,” said an industry analyst. And because many magnet makers are privately held, public share prices only reveal part of the story.