China’s Rare Earth Export Controls Cripple Domestic Magnet Industry

China's rare earth export restrictions, imposed in April as a countermeasure to U.S. tariffs, have severely impacted the country's magnet manufacturers. These producers, already grappling with a sluggish economy and reduced demand from electric vehicle (EV) makers, now face a dual crisis of disrupted exports and weak domestic sales.

Rare earth magnets, critical for EVs, wind turbines, and other high-tech applications, are predominantly supplied by China, which controls nearly 90% of the global market. Public filings reveal that international buyers account for 18% to 50% of revenue for China's top magnet producers, underscoring the sector's reliance on foreign markets.

The immediate effects have been stark. Magnet exports plummeted 75% within two months of the restrictions, forcing some global automakers to halt production. Meanwhile, unsold inventory accumulates in domestic warehouses as manufacturers await export licenses, according to state-backed Baotou Rare Earth Products Exchange.

Small and mid-sized producers have responded by cutting output by 15% in April and May. "Their sales are now being squeezed from both ends—disrupted exports and flagging domestic demand," said Ellie Saklatvala, head of metal pricing at Argus.