By Joe Cash
BEIJING (Reuters) -China’s exports of rare earth magnets fell in September, reigniting fears that the world’s top supplier could wield its dominance over a component key for U.S. defence firms and makers of items from cars to smartphones as leverage in trade talks.
In April and May, Beijing squeezed global automakers with export curbs on a range of rare earths items and related magnets, while negotiators faced off over triple-digit U.S. tariffs on goods from the world’s second-largest economy.
Four months on, after Washington and Beijing unexpectedly reprised threats of fresh tariffs and rare earth export curbs, worry is growing that China could return to the same playbook.
That would mean it reneges on a June deal with the United States to ease the flow of critical minerals.
China’s shipments of rare earth magnets fell 6.1% in September from August, customs data showed on Monday, ending three months of gains, and dropping even before Beijing unveiled a dramatic expansion of its export licensing regime this month.
“The sharp swings in rare earth magnet exports show that China knows it holds a key card in international trade talks,” said Chim Lee, senior analyst at the Economist Intelligence Unit.
EXPORTS FALL FROM AUGUST’S SEVEN-MONTH HIGH
The September fall to 5,774 tons from a seven-month high of 6,146 tons in August aligns with reports that China is already making it harder for firms to secure licences for exports of rare earth magnets.
Its commerce ministry is applying scrutiny similar to that seen in April, at the height of the trade war.
On an annual basis, September shipments rose 17.5%.
Last week, China’s commerce ministry accused the United States of stoking global panic over its rare earth controls by deliberately misunderstanding the curbs, and said it would approve export licences intended for civilian use.
Still, analysts worry China could once again entangle civilian commercial users in curbs aimed at choking U.S. defence firms’ access to critical materials.
“China’s ability to throttle rare earth exports is an exceptionally powerful tool,” said Dan Wang, China director at Eurasia Group.
Apart from disrupting production, such measures would fuel insecurity over access to critical industrial inputs and growing reliance on China, she added.
“The world has to adjust to its management style,” she said, adding that Western countries are not used to complying with a monopolistic control of critical resources from countries on ‘the other side’.
