China Tightens Rare Earth Exports to Block Hoarding

Beijing is warning buyers they face the risk of tighter supply restrictions if they stockpile rare earths or related products such as magnets used in electric motors, according to two people familiar with the matter told the Financial Times. Chinese authorities are deliberately limiting approved export volumes to prevent foreign hoarding.

A survey conducted last month by the US-China Business Council found that half of member companies polled said most of their rare earth applications had been left pending or rejected. Large orders that exceed applicants’ historical averages are subject to stricter scrutiny to guard against perceived hoarding behavior.

China dominates rare earth production, processing about 90% of global supply and manufacturing 94% of permanent magnets. In the ongoing trade war with the United States, Beijing has weaponized its control over this critical industry.

Beijing regulates rare earth output through mining and processing quotas. Last year, only two state-owned enterprises were allocated quotas. In June, China exported 3,188 tonnes of rare earth permanent magnets, down 38% from a year earlier.

In Q2 this year—since Beijing began restricting rare earth exports—magnet export volumes were roughly half the level of the same period last year.

Delays in rare earth exports have prompted some Western companies to shift final product manufacturing to China, aligning with Beijing’s goal of tightening supply chain control.

For example, Louis Pinkham, chief executive of U.S.-based motor maker Regal Rexnord Corp, said the company had moved some production to China to assemble rare earth magnets into products domestically, making exports easier.