Raw materials: Chinese magnets are making a comeback

The threat of massive paralysis in the global automotive supply chain appears to be receding as rare earth magnets from China begin to flow again. However, manufacturers and their suppliers continue to face ongoing uncertainty and the risk of prolonged shortages.

In Europe, suppliers have obtained enough licenses to avoid the major disruptions feared at the beginning of the month. "Maybe one or two production lines will be affected here and there, but we've avoided the worst for now," said Nils Poel, head of market affairs at CLEPA, the European association of equipment manufacturers. He points out that the pace of issuance has picked up significantly, from 25% to 60%. However, applications involving US customers or transiting through third countries such as India are progressing more slowly or remain pending.

Ford has acknowledged that it has closed several plants in the last three weeks due to magnet shortages, its CEO Jim Farley said on Friday. Volkswagen, for its part, says its supply remains stable, while Stellantis says it has overcome its immediate difficulties.

-75% after tariffs

The export restrictions imposed by China in April in response to US tariffs have shaken the market, with rare earth exports falling by nearly 75%. Three months after they came into force, the Chinese licensing system, which is considered opaque, continues to worry manufacturers. As for alternative sources, they are far from optimized.

Faced with this impasse, on Thursday Beijing and Washington announced an agreement to speed up shipments to US companies. The US Treasury said that deliveries will now be "accelerated" for regular customers. "I am now confident... the magnets will flow," Treasury Secretary Scott Bessent said on Fox Business.

According to several European and US industry sources, the situation has gone from "total panic" to a fragile balance, just enough to avoid a shutdown. One European official believes that China is currently issuing "the bare minimum" of licenses to keep production lines afloat.

A long and uncertain process

In the United States, some manufacturers remain stuck. Dexter Magnetic Technologies, which supplies the defense sector, among others, has only obtained five licenses out of 180 applications since April, according to its CEO Joe Stupfel. All of them were for sectors unrelated to defense. "This is a prolonged delay," he said. "It takes 45 days to complete the paperwork on the supplier side, then another 45 days or so to obtain the licenses."