China begins rare-earth magnet exports to India, easing supply pressure
What's the story
China has started clearing rare-earth magnet (REM) import licenses for India, government officials told Business Standard. The move is expected to ease supply pressure on Indian automakers and component makers who had flagged disruption risks. The approvals are being processed by Chinese suppliers for both Indian and foreign-owned units, easing concerns over production disruptions after April 4 export restrictions were imposed.
Approval process
Chinese Ministry of Commerce begins processing applications
The Chinese Ministry of Commerce has started processing and clearing applications for REM import licenses. Some companies have already received the necessary approvals, an official told Business Standard. The approvals are coming through suppliers, including domestic companies and Indian units of foreign firms such as Jay Ushin, Continental AG (Germany), Mahindra vendors, Maruti Suzuki vendors, and Honda Scooters and Motorcycles suppliers.
Market control
China's dominance in global rare-earth magnet production
China is the world's largest producer and supplier of rare-earth magnets, which are essential for automobiles, auto components, electronics, medical equipment, and defense. The country has imposed export restrictions on REMs since April 4, affecting several countries. The Indian automobile industry had raised concerns with the government over delays in approvals from China's Ministry of Commerce disrupting production schedules including those for electric vehicles (EVs).
Licensing rules
China's export licensing norms and India's response
China's export licensing norms were introduced in response to higher US tariffs on Chinese products. Under these rules, Chinese sellers will get export clearance if importers assure there's no dual-use or defense-related application of the materials. The process is said to be complicated and time-consuming. Over the past six months, the Indian government has been negotiating with Chinese authorities over industry concerns regarding delays in processing applications for essential raw material shipments.
Diplomatic assurance
Chinese Foreign Minister's promise to ease restrictions
During a June visit to New Delhi, Chinese Foreign Minister Wang Yi assured External Affairs Minister S Jaishankar that Beijing would ease restrictions on exports of rare earth minerals and other items. Despite disruption and delays, the industry has managed to carry on production. The pace and breadth of approvals will determine if this easing is limited to a few applicants or becomes broader, reducing supply-chain uncertainty for India's auto and EV makers.