On April 4, the Ministry of Commerce and the General Administration of Customs jointly issued an announcement on the implementation of export control measures on seven types of medium and heavy rare earth related items, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, and the announcement was officially implemented on the date of issuance. This export control measure has prompted Noveon Magnetics, the only company in Texas with the ability to produce sintered neodymium magnets, to quickly become the object of cooperation for global buyers.

According to data from Adamas Intelligence, a key raw material research institution, neodymium magnets are regarded as one of the key technologies for US national security. The United States imported about 7,500 metric tons of neodymium magnets from China last year. In contrast, Noveon Magnetics’ annual production capacity is only 1,000 tons. Although the company plans to double its production capacity in the next few years and even hopes to eventually increase it to 10,000 tons, the gap is still huge compared with China’s annual production of about 200,000 tons.

At present, China occupies the leading position in the global production of neodymium magnets, with an output exceeding 90% of the global total, and is one of the few countries with a complete industrial chain from mining, separation, refining to finished products; China also has strong control over the entire rare earth industry chain.

Countries and regions such as the United States, Europe, and South Korea are highly dependent on China’s rare earth magnet resources when manufacturing products such as electric vehicles, robots, and wind turbines. For example, Japan’s TDK, Shin-Etsu Chemical Industry and other companies rely heavily on China for heavy rare earth raw materials; South Korea’s Star Group, Canada’s NeoPerformance Matrials, and Germany’s Vacuumschmelze are also facing raw material supply problems due to China’s export restrictions.

Daryl Kuzubo, CEO of Australia’s Arafura Resources, said, “South Korea, the United States, and Europe are completely dependent on China for permanent rare earth magnets. Their electric vehicles, wind turbines, electronics, robots – products worth trillions of dollars each year, ultimately rely on China, so they must find alternative sources.”

Rare earths are a large family, including light, medium, and heavy types, which are mainly separated by solvent extraction. In order to get rid of their dependence on China’s rare earth resources, countries and regions such as the United States, Australia, and Europe are actively taking action to try to build an independent rare earth alternative industry chain.

Lynas Rare Earth Company of Australia is the largest supplier of separated rare earths outside of China. It is building a heavy rare earth separation facility in Malaysia, which will become the largest heavy rare earth separation facility outside of China after completion. In addition, chemical companies such as Solvay in Belgium and Carester in France have also participated in rare earth separation projects.

Since 2020, the U.S. Department of Defense has invested heavily in the construction of a local rare earth magnet industry chain, with a total investment of more than US$439 million. Among them, it provided US$28 million in funding to Noveon Magnetics and invested US$288 million to support Lynas in building a heavy rare earth separation facility in Texas; at the same time, it invested US$94 million in eVac, a subsidiary of Vacuumschmelze, to build a magnet factory in South Carolina.

MPMaterials, the largest rare earth miner in the United States, also received a $45 million investment from the U.S. Department of Defense to build a complete local industrial chain from mining, separation to finished magnets. It is expected that after the expansion by the end of 2025, it will be able to achieve an annual output of 1,000 tons of magnets and supply products to customers such as General Motors.

However, even if some progress has been made in the supply of raw materials, Western companies still face huge challenges in magnet manufacturing technology and production capacity. Due to the highly customized characteristics of neodymium magnet manufacturing, it is difficult to achieve large-scale standardized production, which is also one of the important reasons why China’s rare earth industry chain is difficult to be completely replaced in the short term.

It is worth noting that China has imposed strict restrictions on the export of rare earth processing and magnet manufacturing technology in 2023. Jon Hekawi, founder of Stormcrow Capital, a Canadian critical mineral consulting company, said that if China’s latest regulatory measures evolve into a ban, it may further hinder Western efforts to expand the rare earth industry in the short term. “It brings additional problems to the West to establish a complete rare earth magnet supply chain.”

China’s irreplaceability in the rare earth industry chain may be based on this, Trump’s attitude towards China has eased. According to a report by the Associated Press on the 23rd, on the 22nd local time, Trump stated in the Oval Office of the White House that he would not take “tough measures” against China during the tariff negotiations, and was “optimistic” that he could reach an agreement with it “quite quickly” and “substantially reduce” the huge 145% tariff imposed on Chinese imports.