China Grants Temporary Rare-Earth Licenses To US Automakers' Suppliers

China has issued temporary export licenses for rare-earth materials to suppliers of U.S. automakers.

What Happened: China has issued temporary export licenses to rare-earth suppliers for the top three U.S. automakers, according to a report by Reuters on Friday. This move comes amid ongoing supply chain disruptions due to Beijing’s export restrictions on these materials.

At least some of these licenses are valid for six months, as per two unnamed sources cited by Reuters. However, details regarding the quantity or specific items covered by the approval remain unclear.

China’s decision in April to limit exports of rare earths and related magnets has affected supply chains crucial to automakers, aerospace manufacturers, semiconductor firms, and military contractors globally. The country’s dominance in the critical mineral industry is seen as a significant leverage point in its trade conflict with the U.S.

Suppliers for General Motors Co. GM, Ford Motor Co. F, and Stellantis NV STLA received clearance for some rare earth export licenses on Monday, one source noted.

Why It Matters: The issuance of temporary licenses by China comes at a critical time when global automakers are grappling with potential production disruptions due to rare-earth supply shortages.

A report from May highlighted concerns from automakers like General Motors and Toyota Motor TM about potential factory shutdowns due to these restrictions.

Furthermore, the ongoing trade tensions between the U.S. and China have exacerbated these challenges, with automakers worldwide warning of significant impacts on production.

The U.S. Vehicle Suppliers Association has also called for immediate action to mitigate these risks. Meanwhile, Japan is reportedly planning to offer a cooperation package to the U.S. to ease trade tensions, which includes addressing rare-earth supply chain issues.

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