Highlights

• China's export curbs on rare earth magnets triggered a 75% drop in exports, causing significant economic strain for domestic magnet manufacturers.
• Despite controlling 90% of global rare earth magnet production, Chinese firms are facing dual pressure from export bottlenecks and a sluggish EV market.
• The export restrictions highlight potential risks of geopolitical trade strategies and underscore the need for diversifying critical mineral supply chains.

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A Times of India (TOI) report (opens in a new tab) by the prominent Indian media’s Business Desk reveals that China’s aggressive curbs on rare earth exports—intended to pressure the U.S. during the recent tariff standoff—have triggered unexpected blowback within its own industrial base. While global automakers scrambled amid magnet shortages, Chinese magnet producers are now reeling from collapsing demand, plummeting revenues, and burgeoning inventories.

According to Reuters, exports of rare earth magnets fell by 75% in just two months after Beijing imposed new licensing rules in April. Though a tentative U.S.–China agreement was reached on June 27 to restart trade, the rollout has been slow. In Inner Mongolia, the Baotou Rare Earth Products Exchange described May as a “crisis” for local magnet firms, warning that damage from the pause would not be easily reversed.

Export sales remain vital even for China, which controls 90% of global rare earth magnet production. In 2024, overseas revenues accounted for up to 50% of total sales for major listed firms. Now, with both export bottlenecks and a sluggish domestic EV market, Chinese producers are under double pressure. Smaller players have already cut production by 15%, while many await export licenses with warehouses full of unsold cargo.

While share prices for some listed magnet firms have rebounded post-deal, analysts like Cory Combs (opens in a new tab) of Trivium China (opens in a new tab) caution that the rally is divorced from market fundamentals. The EV price war and product customization challenges further complicate efforts to pivot to domestic sales.

Crucially, the TOI report underscores a longer-term trend: the bureaucratization of rare earth export approvals in China. Analysts warn that the 2025 agreement may resemble earlier curbs on antimony and germanium, which remain unresolved after nearly a year.

Possible Investor Takeaways

• China's weaponization of rare earth exports can have a boomerang effect both economically and politically.
• The backlog and inventory crisis may lead to industry consolidation, a move some suggest aligns with Beijing’s long-term control strategy.
• For Western investors, the report underscores the urgency of diversifying rare earth supply chains, as political agreements can vanish overnight.
• Will the U.S. and its allies capitalize on this window to build alternative capacity—or revert to dependency?

Source: TOI Business Desk, Times of India, “China’s rare earth exports clampdown: Curbs backfire as local magnet makers reel from demand collapse,” July 7, 2025.

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