China has begun designing a new licensing regime for rare earths that could speed up shipments, but it is unlikely to result in a complete removal of restrictions, as Washington had hoped, according to industry sources.
The Commerce Ministry has informed some rare earth exporters that they will be able to apply for new simplified permits in the future and, in briefings with the sector, detailed the necessary documentation, according to two sources familiar with the matter.
Export restrictions have become Beijing’s main trump card in its trade rivalry with Washington, as China produces more than 90% of the world’s processed rare earths and rare earth magnets, essential for products ranging from cars to missiles.
Following the agreement reached between Presidents Donald Trump and Xi Jinping, China announced last week that it would suspend the restrictions imposed in October for one year.
However, the Chinese Ministry of Commerce did not comment publicly on the broader round of controls introduced in April, which shook global supply chains.
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The White House announced on Saturday that China had agreed to introduce blanket licenses, calling such permits the de facto end of Chinese export controls on rare earths.
Privately, Chinese officials have said they are working on licenses, according to three other sources briefed on the talks, although one of them indicated it could take months.
However, other industry experts said the new licenses do not imply the elimination of the extensive export controls on rare earths that China introduced in April.
One year, potentially higher volumes
The new licenses would be valid for one year and would likely allow for higher export volumes. The companies are preparing documentation, which will require more information from customers, they added.
Sources indicated that they expect greater clarity by the end of the year.
Some Chinese rare earth companies said they had not yet been informed of the change.
General licenses are likely to be more difficult to obtain for users involved in defense or other sensitive areas, according to some industry sources.
All sources spoke on condition of anonymity given the sensitivity of the matter.
Introduced in April and expanded in October, Beijing’s rare earth rules require exporters to obtain licenses for each shipment, a cumbersome and lengthy process that customers say is delaying exports. The restrictions caused shortages in May, paralyzing part of the auto industry.
Of the 2,000 applications submitted by European Union companies since April, just over half were approved.
With information from Reuters
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