On April 4, 2025, the Ministry of Commerce of China and the General Administration of Customs jointly issued a notice announcing the implementation of export controls on seven categories of medium and heavy rare earth related items, including Samarium (Sm), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy), Lutetium (Lu), Scandium (Sc), Yttrium (Y), covering various forms such as metals, alloys, target materials, permanent magnet materials, oxides, and compounds. The regulation, which came into effect from the date of its release, not only marks China’s further upgrade in rare earth resource management, but also raises deep concerns about supply chain security in the global high-tech industry.
Policy Background: The Dual Logic of National Security and Strategic Gaming
1. Maintain resource security and fulfill international obligations
China is the world’s largest rare earth producer and exporter, controlling about 70% of the world’s rare earth mining output and 90% of its refining capacity. The core goal of this export control is to prevent rare earth resources from being used for military purposes or sensitive areas, and to fulfill international non-proliferation obligations. The China Nonferrous Metals Industry Association pointed out that rare earth, as an “industrial vitamin”, is a key support for strategic industries such as national defense, new energy, and semiconductors, and its export control is an internationally recognized security measure.
2. Counter technology blockade and trade game
Although the Chinese authorities did not directly name it, the outside world generally believes that this policy is a “precise counterattack” against the US technology blockade. The US military and semiconductor industries are highly dependent on Chinese rare earth permanent magnet materials, such as the F-35 fighter jet, electric vehicle motors, and 5G base stations, all of which require elements such as Dysprosium and Scandium, while China almost monopolizes the supply of these materials. By regulating exports, China has demonstrated an “asymmetric advantage” in the trade war, forcing the United States to confront supply chain vulnerabilities.
Regulatory Measures: Full Industry Chain Coverage and Refined Management
1. Refine the scope of control to permanent magnet materials
This regulation not only includes rare earth metals and alloys, but also involves high value-added products such as permanent magnet materials and target materials. For example:
-Samarium Cobalt magnet material: used for missile guidance systems and radar equipment;
-Neodymium Iron Boron magnet material containing Terbium and Dysprosium: this high temperature Neodymium magnets used in electric vehicle motors and hard disk magnetic heads;
Each item corresponds to a specific customs code (such as 1C902. a.4 for Samarium Cobalt permanent magnet materials) to ensure the accuracy of export inspection.
2. Strict export process
Enterprises need to apply for a license from the Ministry of Commerce, submit a description of the end user’s use, and indicate the control code during customs declaration. Customs may suspend the release of suspicious declarations to prevent resource abuse. This move aims to balance compliant trade and national security, and promote the transformation of enterprises towards high value-added sectors.
Global Impact: Supply Chain Disruption and Technological Substitution Dilemma
1. Pressure on the US military industry
Terbium, Dysprosium and other elements are essential for manufacturing missile defense systems and F-35 engine coatings, and it is difficult for American companies such as Raytheon and Lockheed Martin to find alternative sources in the short term. Although the United States has rare earth reserves of 1.8 million tons, its local mining is limited by environmental regulations, and its annual production is less than 12% of the global total.
2. Global industrial chain restructuring and price fluctuations
China’s regulatory measures may lead to a “dual track system” of rare earth prices: domestic prices are regulated while international market prices soar due to scarcity. For example, the prices of praseodymium and neodymium rose by 40% after the regulation in 2023. Although the United States has attempted to replace rare earth projects in places such as Greenland and Mongolia, these regions lack mature processing capabilities. For example, the rare earth concentrate from the Mountain Pass mine in the United States still needs to be transported to China for separation and purification.
3. The joint impact of Europe and Asia
The European offshore wind power industry relies on Chinese permanent magnets, and if the supply chain is disrupted, its turbine production capacity may decrease by 30%. Although Japan and South Korea are accelerating the development of recycling technology, they still find it difficult to break free from dependence in the short term.
Strategic Depth: Why is China Focusing on Rare Earth Permanent Magnetics?
1. Technological monopoly and industrial chain closure
China not only controls rare earth mining, but also holds 92% of the world’s rare earth magnet manufacturing capacity. Even if the United States mines rare earth ores, it still relies on China’s separation and purification technology.
2. Promote the upgrading of domestic industries
By restricting the export of primary products, China is forcing enterprises to transform towards high value-added sectors, such as Dysprosium free high-performance permanent magnets and rare earth permanent magnet motors
3. Environmental protection and sustainable development considerations
Rare earth mining causes serious damage to the ecological environment. The Chinese government promotes green mining and reduces environmental pollution by setting environmental standards.
Future Outlook: Game Upgrade and Global New Order
In the short term, the United States may alleviate the crisis through diplomatic pressure, reserve release, or technological breakthroughs. For example, the US Department of Energy is experimenting with extracting rare earths from coal, but commercialization is still several years away.
In the long run, the global rare earth pattern will show a trend of “multipolarity”:
1. China: Consolidate processing and technological advantages, lead the high-end magnetic material market;
2. Europe and America: Accelerating the construction of local supply chains, but facing enormous cost and environmental pressures;
3. Emerging countries: Mongolia, Vietnam, etc. may become targets of the US and Europe, but with high geopolitical risks.
China’s rare earth export control this time is not only a trade countermeasure, but also a concentrated demonstration of its geopolitical and economic strength. It reveals the fragility of the global industrial chain and forces countries to re-examine the strategic value of key resources.
Post time: Apr-09-2025