Carmakers search western provides of uncommon earths and magnets | USAEMALL.com

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European carmakers are in talks with western magnet and rare earths companies as they seek to secure alternative sources of the critical materials amid a shortage exacerbated by Chinese export restrictions.

Rare earths are vital to car manufacturers because they are used in the permanent magnets in electric vehicle motors as well as other components found in all cars. China, which dominates the supply and processing of the materials, tightened export controls in April in response to the escalating US tariff war.

Germany’s Mercedes-Benz is in talks with the UK’s Rainbow Rare Earths to secure future output from its South African mine, according to one person familiar with the talks.

Rainbow, which is backed by TechMet, a mining company part-owned by the US government, expects to start producing rare earths in 2027 that will end up in permanent magnets.

Mercedes declined to comment. Rainbow said it “continues to progress offtake discussions with a variety of industry participants” including automakers and global trading companies.

Frank Eckard, chief executive of German magnet maker Magnosphere, said Porsche and other carmakers had asked for additional supplies to avoid a shutdown of production lines in the coming weeks.

“Everybody started calling and said, ‘can you give us 2,000 magnets because our line is going to stand still. The price is not an issue — let’s talk about what you can do, when can we have it, and how can you do it.’ It’s just unbelievable,” Eckard said. 

Porsche declined to comment on its suppliers.

Eckard predicted that car production would be halted by mid-July unless companies could find alternative sources for the magnets.

The shortage is not confined to Europe — Ford in May temporarily halted production at its sport utility vehicle plant in Chicago because of a shortage of magnets. 

Some companies have been asking Magnosphere, which uses rare earth materials from China to produce its magnets, if it would be able to make them without relying on Chinese supplies, according to Eckard. 

Berenberg analysts said on Thursday that the geopolitical tussle over the metals would “catalyse investment in non-Chinese supply chains”, with companies including Rainbow expected to benefit.

Car executives have repeatedly warned that stockpiles of rare earth magnets would last only a couple of weeks to a few months.

One of the few exceptions is Hyundai. The South Korean carmaker and its sister company Kia have told investors they have rare earth stockpiles lasting until at least the end of year, according to two people with knowledge of the discussions.

“As part of our standard business practices, we maintain appropriate inventory levels to support uninterrupted production. We do not disclose specific inventory details or procurement strategies,” Hyundai said.

Even if European carmakers do secure rare earths mined from outside China, however, the majority of magnet manufacturing occurs in Asia.

“Unless Europe gets real about making permanent magnets, we’re not going to solve the problem,” said one executive.

Beijing has recently agreed to fast-track approvals for rare earth export licences for some European companies following warnings that its new licence system for rare earths and related magnets risked causing widespread factory stoppages and disruptions to global supply chains.

But industry executives have said manufacturers may still face delays in receiving their rare earth and magnet shipments because of a backlog of licence applications.

Even for companies such as Volkswagen, which have already received a licence from China, it would still take weeks or even months before the shipments arrive, they added.

Additional reporting by Song Jung-a in Seoul