Export drop, weak EV demand push producers to the brink
China’s export restrictions on rare earth magnets have disrupted the global auto supply chain and triggered economic fallout at home, dealing a blow to domestic producers already struggling with low demand and geopolitical pressure. Despite a U.S.-China deal announced on June 27, the path to recovery remains uncertain.
In April, Beijing halted rare earth and magnet exports in response to U.S. tariffs, causing magnet exports to plunge by 75% within two months. Global automakers were forced to pause production, while Chinese suppliers—especially in EV-linked sectors—were left with mounting inventories and slashed output.
The Baotou Rare Earth Products Exchange, a state-backed platform in Inner Mongolia, described the crisis as severe, noting that implementation of the export agreement could take time. “Inventory is piling up,” it warned hours after the deal’s announcement. With magnet producers heavily reliant on exports, the abrupt disruption has cut off up to 50% of revenue for some listed firms.
Producers squeezed as margins shrink and licenses delay
According to multiple sources, producers have cut output by around 15% since April, citing difficulties in reselling customized products and limited domestic demand. Two major magnet manufacturers anonymously told Reuters they expect revenue to decline significantly in 2025.
“Sales are now being squeezed from both ends – disrupted exports and flagging domestic demand,” said Ellie Saklatvala of Argus. Analysts also note that China’s tight control over licensing mirrors previous patterns with other critical minerals like antimony and germanium, which have yet to return to normal export levels.
Listed companies such as Baotou Tianhe and Yantai Zhenghai Magnetics have acknowledged the pressure. While some firms have obtained licenses, uncertainty around future shipments and customer losses persists, especially as the EV sector undergoes price wars and production cutbacks.
Market rebound may not reflect reality
Shares of listed magnet makers have recovered from April lows, but analysts warn this optimism is unfounded. “None of the current outlooks support the rise in share prices we’re seeing,” said Cory Combs of Trivium China. Private firms, which make up a large portion of the sector, remain vulnerable and less visible to investors.
The customized nature of magnet production, combined with logistical challenges and licensing delays, makes domestic redistribution nearly impossible. Storage costs are mounting, and many manufacturers are struggling to sustain operations while waiting for export permits.
Long-term shift and possible consolidation ahead
Experts believe the export control regime marks a structural shift for the sector. “There’s no going back,” said David Abraham of Boise State University, pointing to increased paperwork and approval times as permanent changes.
China may even welcome further consolidation in a fragmented industry with hundreds of players. “Beijing likely sees consolidation as a positive—offering more control and traceability over strategic materials,” Abraham added.
While the June 27 agreement offers a potential path forward, the pace of normalization remains in doubt. For now, China’s rare earth magnet producers face a prolonged period of instability, squeezed between global tensions and shrinking local demand.
