...raises the alarm as China tightens export rules fo...
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Automotive industry groups have raised the alarm over the ramifications of China's latest move torestrict critical rare earth exports, saying the measures could pave the way to a period of supply chain chaos.
China's Commerce Ministry last weekannouncedexpanded curbs on the export of rare earths and related technologies, seeking to prevent the "misuse" of minerals in the military and other sensitive sectors.
Beijing has since defended the policy,sayingit was "not afraid" of a U.S. trade war after President Donald Trumpthreatenedto impose 100% tariffs on Chinese imports.
Despite an agreement in July designed to fast-track shipments to the region, Europe's auto industry has been experiencingsignificant disruptionafter China imposed rare earth export curbs in early April.
The German Association of the Automotive Industry (VDA), the country's main car industry lobby, said China's new regulations were expected to have "far-reaching consequences for deliveries of the affected products to Germany and Europe," as well as for their onward transport.
China's latest export restrictions will hit the battery and semiconductor industries "particularly hard, and thus also the automotive industry," the VDA spokesperson told CNBC by email on Tuesday.
The German car industry lobby called on policymakers in both Brussels and Berlin to tackle the issue "forcefully" with China to quickly find a viable solution.
"The fact is that the Chinese export restrictions on Rare earths and permanent magnets implemented in April this year have already significantly exacerbated the supply situation for rare earths and strategic materials. The new measures now go even further," the VDA spokesperson said.
Rare earth metals are vital components to the production of electric vehicles, as well as various high-tech applications, including electronics and renewable energy applications.
Demand for Rare earths and critical minerals is expected togrow exponentiallyin the coming years as theclean energy transition picks up pace.
China is theundisputed leaderof the critical minerals supply chain,accountingfor roughly 60% of the world's production of rare earth minerals and materials. U.S. officials have previouslywarnedthat this poses a strategic challenge amid the pivot to more sustainable energy sources.
Depleted reserves
Roberto Vavassori, chairman of the Italian auto part maker lobby ANFIA,reportedlysaid Tuesday that while manufacturers had been able to maintain production when China restricted supplies over the summer, reserves of rare earth metals were now at risk of being depleted.
This buffer "is not there anymore," Vavassori said at a conference in Milan,according to Reuters. ANFIA did not respond to a CNBC request for comment.
Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, said China's new crackdown on exports is pressing from a supply chain perspective.
"China dominates 90% of global refinery capacity and therefore it's a real bottleneck," Luman told CNBC by email.
"Across the supply chain there are still inventories, such as at Tradium's major storage facility near Frankfurt, so I don't expect immediate large fallouts already," Luman said.
"But rare earths include a range of elements, some could run short in delivery. And going forward relaxation of supplies is highly dependent on upcoming talks between China," he added.
Source: Original financial news report
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