China's chokehold on rare earths set to suffocate auto industry
Alarm over China's stranglehold on critical minerals grew on Tuesday as
global automakers
joined their US counterparts to complain that restrictions by
China
on exports of rare earth alloys, mixtures and magnets could cause production delays and outages without a quick solution.
German automakers became the latest to warn that China's export restrictions threaten to shut down production and rattle their local economies, following a similar complaint from an Indian EV maker last week.
China's decision in April to suspend exports of a wide range of
rare earths
and related magnets has upended the supply chains central to automakers, aerospace manufacturers, semiconductor companies and military contractors around the world.
by Taboola
by Taboola
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The move underscores China's dominance of the critical mineral industry and is seen as leverage by China in its ongoing trade war with US President
Donald Trump
. Trump has sought to redefine the trading relationship with the US' top economic rival China by imposing steep tariffs on billions of dollars of imported goods in hopes of narrowing a wide trade deficit and bringing back lost manufacturing.
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Trump and Chinese President Xi Jinping are expected to talk this week, White House spokeswoman Karoline Leavitt told reporters on Tuesday, and the export curbs are expected to be high on the agenda. "I can assure you that the administration is actively monitoring China's compliance with the Geneva trade agreement," she said.
MAGNETS HELD UP AT CHINA PORTS
Shipments of the magnets, essential for assembling everything from cars and drones to robots and missiles, have been halted at many Chinese ports while license applications make their way through the Chinese regulatory system. The restrictions have triggered anxiety in corporate boardrooms and nations' capitals- from Tokyo to Washington-as officials scrambled to identify limited alternative options amid fears that production of new automobiles and other items could grind to a halt by summer's end.
"If the situation is not changed quickly, production delays and even production outages can no longer be ruled out," Hildegard Mueller, head of Germany's auto lobby, said on Tuesday.
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Also read: Defence stocks surge continues amid escalating India-Pakistan tensions since Pahalgam attack Pakistan's propaganda of multiple Rafale jets being shot fuelled Chinese defence stocks China's state-owned Aviation Industry Corporation of China (AVIC), particularly its Chengdu Aircraft division, saw one of the sharpest stock moves. AVIC Chengdu, which designs and manufactures the JF-17 and J-10C fighter jets used by the Pakistan Air Force, surged from Rs 828 on 7 May to Rs 1,145 by 12 May, witnessing a massive 38 percent jump in five days. Although the stock had cooled to Rs 939 by Thursday, it retained a net gain of 13 percent since the launch of Op Sindoor. Furthermore, another subsidiary of the state-owned AVIC group—AVIC Airborne Systems—which supplies precision avionics and weapons for the J-series jets operated by Pakistan, also saw a modest rise. 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What this could mean for balance of air power Western defence giants and market sentiment Western defence companies, from France's Dassault Aviation to the U.S.-based Lockheed Martin, experienced divergent market responses, shaped as much by battlefield developments, speculative reports and domestic developments. Dassault Aviation, the manufacturer of India's Rafale jets, recorded a 6.4 percent decline between 7 and 12 May, with its stock falling from Rs 31,406 to a low of Rs 29,405. However, it had rebounded back to Rs 31,367 on Thursday, nearly regaining its pre-drop value. Incidentally, while Dassault Aviation hit its lowest point on 12 May, China's AVIC Chengdu registered its highest stock price during the same period, highlighting the contrasting market sentiments around the two defence suppliers amid the conflict. 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Beijing can directly intervene in markets, banning short selling, for instance, to stabilise or boost the performance of AVIC subsidiaries. That kind of intervention isn't feasible in countries like France, where the government usually avoids market interference.' Ultimately, the swings observed in the wake of Operation Sindoor reinforce a perceived reality of defence stocks remaining highly reactive to geopolitical flashpoints, with prices shaped as much by perception, speculation, politics and investor psychology as by actual battlefield performance. (Edited by Viny Mishra) Also read: Operation Sindoor signals a real paradigm shift, says ex-IAF chief. 'We hit where it hurts the most'
