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Chinese Government Measure Affects Materials Considered Vital in High-Tech and May Have Direct Impact on Global Production Chains, Including the Automotive Industry.
The China intensified this June its control over the export of materials considered strategic, with a special focus on so-called rare earths, a group of crucial elements for both civilian and military purposes.
According to specialists, the measure has the potential to destabilize global production chains, especially in the automotive, renewable energy, and defense sectors, as the Asian country holds about 70% of the world’s production of these substances and around 90% of refining capacity.
The official announcement was made by the Chinese Ministry of Commerce and reinforces previously updated regulations from 2023 and 2024, focusing on national security.
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The new guidelines require explicit authorization for the export of seven key elements: dysprosium, terbium, lutetium, ytterbium, samarium, gadolinium, and scandium.
The decision affects countries such as the United States, Japan, South Korea, and members of the European Union, which heavily rely on these inputs to maintain the manufacturing of strategic technological and industrial products.
“The measure aims to protect China’s fundamental interests and prevent the misuse of these materials in activities that jeopardize international stability,” said the spokesperson for the Ministry of Foreign Affairs in Beijing.
Behind the scenes, the decision was understood by Western analysts as a response to sanctions imposed against the Chinese semiconductor and artificial intelligence industries.
Washington, for example, had already restricted the sale of AI chips to China in 2024. In retaliation, Beijing began to block export licenses for essential materials for the production of arms, electric vehicles, wind turbines, and defense electronic systems.
Why Are Chinese Products Strategic for Civilian and Military Purposes
The rare earths involved in the new regulation are indispensable inputs for the manufacturing of high-performance electronic and magnetic components.
In the civilian sector, they are present in smartphones, tablets, hard drives, rechargeable batteries, wind turbines, solar panels, and — most importantly — electric vehicle motors.
In military use, these elements are considered critical for the development of sensitive technologies, such as guided missiles, radars, combat aircraft, proximity sensors, nuclear submarines, and encrypted communication systems.
According to the Pentagon, without constant access to these materials, there is a risk of significant operational capacity paralysis for the U.S. Armed Forces.
Dysprosium and terbium, for example, are used to enhance the thermal stability of neodymium permanent magnets, which are present in military drones and tracking systems.
Lutetium, in turn, is used in radiation detectors for medical and military use. Samarium is used in the magnets of high-torque electric motors.
Direct Impact of China’s Decision on Automakers
The most immediate response to the Chinese blockade came from the automotive sector. Neodymium-iron-boron permanent magnets, reinforced with dysprosium and terbium, are fundamental for the motors of electric and hybrid cars.
They are also found in advanced driver-assistance systems (ADAS), stability controls, regenerative brakes, parking sensors, and infotainment systems.
Ford confirmed the temporary shutdown of an assembly line in Chicago due to difficulties in replacing magnets and sensors imported from Asia. In Europe, auto parts factories in Germany and Hungary reported production cuts.
The sector was already facing difficulties with semiconductor supply and is now dealing with a new threat to the continuity of large-scale production.
With limited stocks of magnetic components, the outlook is for logistical bottlenecks, rising costs, and delays in launching new models — especially the fully electric vehicles planned for the second half of 2025.
“It’s a total panic situation. Suppliers are holding back materials or charging outrageous prices. Automakers are desperate,” said an executive from the magnet industry based in the Netherlands.
Blocked Licenses and Diplomatic Maneuvers
Data obtained by Reuters indicates that only 25% of export requests submitted to China between June 1 and 14 were authorized.
The majority of these licenses were granted only for materials with civilian applications and low geostrategic risk. Materials considered to have “dual use” — with military potential — continue to be held back.
During the week of June 10, during a round of trade negotiations in London, delegations from the United States and the European Union pressured China to release the licenses. Chinese authorities indicated a willingness to expedite specific authorizations but did not commit to the more sensitive materials.
Meanwhile, Washington continues to enforce its own restrictions on the export of cutting-edge technology to Chinese companies.
In parallel, the U.S. Department of Defense has initiated studies to reactivate rare earth mines in Texas and California, as well as to establish agreements with producers in Australia.
Supply Chain at Risk and Race for Alternatives
The current crisis exposes the weakness of various modern industrial supply chains. From smartphones to wind turbines, satellites to electric vehicles, almost all depend on at least one rare earth element processed in China.
Technology companies are doubling down on investments in material recycling and developing technologies that do not require rare earths. In Japan, Honda has been working on electric vehicle motors without permanent magnets since 2022 but has not yet been able to scale production to meet global demand.
The European Commission announced in Brussels on June 12 an emergency package of tax incentives for sustainable mining projects within the bloc, including explorations in Scandinavia and the Iberian Peninsula.
In Brazil, the Brazilian Company of Metallurgy and Mining (CBMM) and the state-owned Amazônia Mineração announced plans to expand the extraction of niobium and rare earths in the Midwest and the Legal Amazon, reinforcing the country’s role in the geopolitical landscape of critical minerals.
However, experts point out that refining these elements remains the biggest bottleneck outside China.
Without equivalent infrastructure and technical capacity, most nations export raw ore and import the finished product from Beijing.
In light of the escalating tensions and growing competition for strategic materials, will civilian and military industries be able to create quick alternatives or continue to be vulnerable to China’s decisions?
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