German machinery manufacturers are increasingly grappling with supply bottlenecks for rare earths and are calling on the European Union to ramp up pressure on China, according to the industry association VDMA.
"We are already seeing that rare earths are no longer reaching our member companies," VDMA President Bertram Kawlath said during a video conference with journalists. He pointed out that this particularly concerns magnets for electric motors, which are widely used--from food packaging to electric mobility. In China, there are about half a million export applications pending, and authorities are overwhelmed with granting export permits.
If no alternative suppliers can be found, the EU and the German government must engage in high-level negotiations with China to lift export restrictions, Kawlath said. "They need to bring the full weight of the European market to the negotiating table. We are also competing with the United States, which is currently aggressively seeking to secure special rights to these products."
Rare earths remain a major point of contention in US-China relations. Recently, both sides announced they had reached a basic understanding, which is expected to ease export controls on rare earths from China.
The machinery sector is a backbone of the German economy, employing around one million people. The predominantly medium-sized industry also includes listed giants such as Thyssenkrupp, Siemens Energy, and Gea.
A range of materials are affected by the shortages, said VDMA Managing Director Thilo Brodtmann, including nitrocellulose and germanium. Solar and wind power installations, as well as battery cells, also rely on rare earths. "This is clearly an issue that the Chinese are deliberately using as leverage," Brodtmann criticized, noting that the approval process is completely non-transparent. The EU must negotiate with China to resolve the blockade, which could help avoid production shutdowns. "In the medium and long term, we need to find other partners around the world to supply us."
The association representatives spoke on the occasion of a VDMA position paper on relations with China, published Thursday. The paper argues that, supported by the "Made in China 2025" strategy, Chinese machinery companies have become increasingly formidable competitors. "Unfair state subsidies for Chinese companies play a major role in international business," it states. The EU should impose countervailing duties on imports from third countries that violate EU anti-dumping or anti-subsidy rules, the association demands. China, with its aggressive export policy, is particularly in focus.
(Reporting by Tom Käckenhoff, editing by Thomas Seythal)
