Chinese Rare-Earth Dealers Dodge Rules

“Chinese rare-earth magnet companies are finding workarounds to Beijing's onerous export restrictions, as they seek to keep sales flowing to Western buyers without falling afoul of China's authorities.

 

The companies are tweaking magnet formulas to avoid using certain restricted rare-earth elements and devising other strategies to get powerful magnets out of the country such as embedding them in motors, according to employees of several large Chinese magnet companies and Western firms that buy from them.

 

The strategies -- which are legal -- don't work perfectly and the new magnets sometimes behave differently than traditional ones. But Chinese companies have big and growing magnet-making capacity, and say they are determined to find legal ways to maintain exports.

 

The drive is the latest twist in a long-running battle between China and the U.S. over rare earths. China dominates the global supply of rare earths and the magnets they are made of. They are crucial to making everything from cars to wind turbines and jet fighters.

 

Earlier this year, as Beijing traded blows with the Trump administration over U.S. tariffs on Chinese goods, Beijing set up a new export-licensing regime, choking off the supply of rare earths and inflicting pain on Western businesses. As part of an October deal with the U.S., China agreed to postpone certain impending restrictions, but Western businesses worry the supply will be insufficient.

 

That has motivated Chinese rare-earth companies to find ways to ease the flow.

 

One approach has been to use technical innovations. Certain powerful types of rare-earth magnets -- often used for car engines, robotics and industrial machinery -- typically use small quantities of dysprosium and terbium, two "heavy" rare-earth elements, to allow magnets to function at high temperatures. Chinese rules introduced in April mean that magnets with even small amounts of these materials require export licenses. It often takes weeks or months to get approval -- if it comes at all, said rare-earth firms and traders.

 

That has spurred a race by Chinese magnet companies to make better magnets without heavy rare earths. They are making such magnets more heat-resistant by, for instance, grinding the magnet material until it is extremely fine. That requires specialized machinery and adds significant costs. While the development of magnets that are free of heavy rare earths has gone on for years, the export restrictions have spurred a new push.

 

The resulting magnets are designed to operate at temperatures up to about 300 degrees Fahrenheit, sufficient for use in many types of home appliances. Carmakers, aircraft manufacturers and others often will require magnets with even more heat tolerance.

 

While the workarounds offer potential short-term solutions, traders and rare-earth companies warn that Beijing could exploit China's chokehold over rare earths again in the future for geopolitical gain. That could result in even tighter export controls and the closing of loopholes.

 

Chinese companies say foreign buyers are becoming frustrated and are developing alternative rare-earth sources outside of China.” [1]

 

1. World News: Chinese Rare-Earth Dealers Dodge Rules. Emont, Jon.  Wall Street Journal, Eastern edition; New York, N.Y.. 04 Dec 2025: A9.