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China has said it is issuing general licences for exports of rare earths, in a move that could ease trade tensions with the US, Europe and other trading partners and alleviate acute shortages that have gripped global supply chains.
As part of a trade war truce agreement between the US and China last month, Beijing agreed to begin issuing general licences for exports of rare earths and related magnets, which are essential for industries from automotive to electronics.
Western companies hope general licences will let them more freely import rare earths within a given time period.
China’s commerce ministry said on Thursday that it “actively applies facilitation measures such as general licences to promote the compliant trade of dual-use items and effectively safeguard the security and stability of global industrial and supply chains”.
“As long as the export applications are for legitimate civilian use and are compliant, the Chinese government has approved them in a timely manner,” a ministry spokesperson said.
The statement was the first signal that Beijing had begun easing the restrictions on rare earths and related magnets that have choked off supply chains, rattled trading partners and forced the US to the negotiating table.
China dominates the supply chain for rare earths, accounting for 70 per cent of mining of the minerals, 90 per cent of separation and processing and 93 per cent of rare earth magnet manufacturing.
Beijing’s introduction of a stringent new export control regime this year also damaged confidence in the EU, threatening its car manufacturers and other industries with shortages and even production shutdowns.
EU officials have told member states that about 75 per cent of company requests are now being met, up from 50 per cent in October, after frequent talks between Brussels and Beijing.
The bloc outlined a plan on Wednesday to reduce dependence on China for critical minerals. It includes €3bn to support mining, processing and refining, a purchasing agency to build stockpiles and a push to recycle waste into new products.
France’s President Emmanuel Macron, during a visit to Beijing on Thursday, warned his Chinese counterpart Xi Jinping over trade, saying that growing imbalances were a threat to the relationship.
The full details of the general licensing system remain unclear. Chinese officials have told buyers and exporters that the licences will be valid for one year and will specify the total volume of rare earth products that can be exported to each customer during that period.
A Chinese magnet maker briefed by officials said the licences were intended for established magnet buyers with records of procuring certain volumes. The system would allow Chinese officials to ensure that foreign rare earth magnet buyers were not buying beyond their needs to resell or stockpile supplies.
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The person added that the new system was likely to benefit only the largest rare earth magnet producers and their regular clients, but would not change the cumbersome application process for China’s smaller magnet makers, who primarily handle one-off or irregular orders.
Two people familiar with the matter said they had been told by Chinese officials that Beijing had approved the issuance of general export licences to the country’s traders, but they were not aware of it benefiting European companies yet.
Two experts closely tracking the industry and Chinese export data said Beijing had in recent weeks been permitting magnet exports. That could be a way to deter the establishment of alternative western supply chains for magnets — needed by a broad range of manufacturers including carmakers — said one.
Neo Performance Materials, a rare earths processor and magnet maker with operations in China and in the west, told the Financial Times this week that its licence applications to the country were being approved. The company has customers across the automotive and other non-military sectors.
Additional reporting by Camilla Hodgson in London
