China began suspending exports of rare earth elements (REE) and magnets containing rare earth elements this week after a government order. Under a government order issued last week, exports of REE and magnets to all countries in the world require new licenses that must be approved by the government.
This is seen as retaliation for the United States imposing high tariffs on China two weeks ago. The exports were suspended because China has not yet set up a system to issue the necessary licenses. While waiting for the system to be in place, global supplies of REE and REE magnets will decrease.
The export suspension will create global supply chain issues as China holds 70% of processed REE production and 90% of REE-based magnets. All of these are important for the production of vehicles, EVs, electronic equipment, semiconductors and even military equipment.
Japan and Australia have REE export capacity but it does not meet market needs. Canada announced it would start mining REE last year but operations will only start in 10-15 years. China dominates the REE processing market because it is a polluting industry.
This is a factor why the Lynas REE processing plant in Pahang received protests from local residents and caused dust pollution around the elements being mined several years ago before the moratorium was issued by the authorities.
REE exports to countries around the world were carried out by China to prevent the United States from obtaining supplies since restrictions were imposed on the country last year due to the United States placing several Chinese companies on an entity list for allegedly helping to develop weapons for military needs.