China’s rare earth squeeze puts defense giants in the crosshairs

the Cars and Robots The industries have struck Especially difficult Through the rare land export restrictions in China in recent weeks, analysts warn against Western defense giants with heat.

Senior American and Chinese officials resume Commercial conversations In London for a second consecutive day on Tuesday, he pushed to cancel the escalation tensions on rare land minerals and advanced technology.

The White House has signal Preparing to alleviate chips export controls if Beijing accelerates rare land exports, which enhances the investor’s hopes for a breakthrough. Both sides accused each other of retreating in an initial business deal in Geneva last month.

In early April, the Chinese Ministry of Commerce imposed export restrictions on many rare and magnets used on a large scale in the automotive and defense sectors. The restrictions were part of the response to the American president Donald TrumpIncreased customs tariffs on Beijing exported products.

On Monday, the director of the National Economic Council, Kevin Haysit, told CNBC’s.Squawk box“He expected a deal on rare land quickly.

“So, our expectations are that immediately after shaking hands, any export controls will be reduced from the United States, and the rare land will be launched in size, then we can return to negotiating smaller matters,” said Haset.

China is the undisputed leader for the critical metal supply chain, production Nearly 60 % of the world’s supplies for rare land and He treats Nearly 90 %, which means that they import these materials from other countries and treat them. Former US officials to caution This dominance constitutes a strategic challenge among the axis of the most sustainable energy sources.

William Payne, head of commercial policy in the British Chambers of Commerce, said that it seems that some progress has been made on the first day of commercial talks between the United States of China, but remains “completely vital” to make another progress in the rare land policy.

“We have seen some relaxation during the weekend with the licenses granted in the sectors associated with robots and electric cars, but if you take, for example, decisive minerals like Samarium, inside the magnet, and this is very necessary to build a F-35 fighter plane in the United States,” Pain told CNBC “.Europe early editionTuesday.

“They cannot make them without that. And not reaching this strongly affects both the American construction in this field, but also its national security if that remains in place,” he added.

The shares of some European defense giants were trading in less on Tuesday morning before the US -Chinese negotiations. Manufacturer of the German tank gearbox Rinck Nearly 8 % decreased to lead the losses on the Stoxx 600 Pan-European. Sweden Hurt Germany RheinmetallAt the same time, they both fell more than 3.5 %.

CNBC contacted the US Department of Defense and the European Commission, the executive arm of the European Union, to comment.

Rare Earth elements play a fundamental role in modern defense techniques, according to SFA-Axford ConsultanceEnabling advanced radar and sonar systems, laser steering techniques and payment in combat environments.

Its car industry groups have Complain About the exhausting process to try to obtain the necessary approvals, and warn against increasing production threats while depleting inventory. However, China and European car giants seem to offer something on the weekend.

The Chinese Ministry of Commerce said on Saturday that it is ready to create the so -called “green channel” to submit applications for export qualified to accelerate the approval process for European Union companies. Beijing has also granted rare ground licenses to United States suppliers for auto giants General Motorsand Ford And pocket maker Stelantisand Reuters mentioned Friday, quoting unnamed sources.

“It is a matter of time before the defense industry appears to be alarm due to a lack of land Nader-indicated that many of them have already done so behind closed doors.”

“Defense companies are in the front line to influence, given that we need thousands of pounds from rare land in every submarine and fighter plane,” Paskran told CNBC via email.

Paskran CSIS said, adding that this need arises primarily due to the prevailing price dynamics.

“If the price of Pressodymium-surodymium (PRIND) is the decisive inputs of the permanent magnets of the rare land-less than $ 60 per kilogram by 2030, nearly half of the non-mounting supplies are not interior will become financially inappropriate.

She added: “On the aspect of the demand, the implementation of incentives to buy minerals from allied countries – is similar to the provisions mentioned in the law to reduce inflation – it will be necessary.”

Last month, China Temporarily stop Export restrictions targeting 28 American companies after a commercial truce reached between Washington and Beijing in Switzerland.

China continued to prevent exports from that seven rare ground minerals to the United States. Many 28 American companies are granted a distance from dual export restrictions are common targets for Beijing’s sanctions due to their activity in the defense sector.

Henry Sanderson, a co -fellow of the Royal United Services Institute (Rusi), a London -based defense and security research center, said the defense industry was not like the auto sector when it came to fears of the impact of the rare land shortage.

“Defense is difficult because it is less transparent, but they definitely use rare land and rare earth magnets, especially the so -called Samarium cobalt magnets, but he asked for much smaller EVS, robots or anything like this,” Sanderson told CNBC by phone.

“I am less clear whether the defense is like civil industries, but saying this, given the level of magnet production in the West, it is very small,” he added.

– Eunice Yoon and Erin DOHERTY of CNBC contributed to this report.