Why China's curbing of rare earth magnet exports are worrying
What's the story
China's rare earth magnet exports have witnessed a significant decline in September. The fall has raised concerns that the country could use its dominance over this crucial component as leverage in trade negotiations. This comes after Beijing had previously imposed export restrictions on various rare earth items and related magnets, affecting global automakers.
Market impact
End of 3-month growth streak
China's rare earth magnet exports fell by 6.1% in September from August, ending a three-month-long growth streak. The decline comes even before Beijing announced a major expansion of its export licensing regime this month. Chim Lee, a senior analyst at the Economist Intelligence Unit, said "the sharp swings in rare earth magnet exports show that China knows it holds a key card in international trade talks."
Trade tensions
China accuses US of misinterpreting rare earth controls
Last week, China's commerce ministry accused the US of inciting global fear over its rare earth controls by misinterpreting the restrictions. The ministry also said it would approve export licenses for civilian use. However, analysts are concerned that China could once again entangle civilian commercial users in curbs aimed at choking US defense firms' access to critical materials.
Export trends
Significant drop in shipments to US
In September, shipments to the US fell by a whopping 28.7% month-on-month. However, exports to Vietnam increased by an impressive 57.5% during the same period. The Netherlands processed 109% more rare earth magnets than in August, but this figure is skewed due to Rotterdam port's status as a major transit hub for Europe-bound trade.
Diplomatic negotiations
Trump hints at delaying tariff increases
Ahead of the data release, President Donald Trump said he didn't want China to "play the rare earth game with us." He hinted at possibly delaying tariff increases beyond 100% if China agreed to buy US soybeans. However, Beijing has shown no signs of backing down from its new wider curbs, which are set to come into effect just days before the November 10 expiry of the latest 90-day tariff truce with Washington.