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Automakers in Europe are engaging with western firms that supply magnets and rare earth materials to find alternative sources due to a shortage that has been worsened by Chinese export limits.
Rare earth materials are crucial for vehicle manufacturers as they are used in the permanent magnets found in electric vehicle motors along with various other car components. China, which leads in the supply and processing of these materials, imposed stricter export regulations in April as a reaction to the growing trade conflict with the US.
Mercedes-Benz from Germany is in discussions with the UK’s Rainbow Rare Earths to secure future production from its mine in South Africa, according to sources familiar with the negotiations.
Rainbow, supported by TechMet, a mining firm partly owned by the US government, anticipates starting rare earth production by 2027, which will be utilized in permanent magnets.
Mercedes did not provide comments. Rainbow mentioned that it is “continuing discussions with various industry players,” including automakers and trading firms globally.
Frank Eckard, CEO of the German magnet manufacturer Magnosphere, noted that Porsche and other car brands are requesting extra supplies to prevent potential shutdowns on their production lines soon.
“Everyone started contacting us, asking, ‘Can you deliver 2,000 magnets because we risk halting our production? The price doesn’t matter — let’s discuss what you can provide, when you can deliver, and how you can do it.’ It’s incredible,” Eckard stated.
Porsche did not comment regarding its suppliers.
Eckard warned that car production might stop by mid-July unless alternative sources for the magnets can be found.
This shortage affects more than just Europe — in May, Ford temporarily halted production at its SUV plant in Chicago due to magnet shortages.
Some firms have inquired whether Magnosphere, which currently relies on rare earth materials from China for its magnets, can produce them without using Chinese supplies at all, according to Eckard.
Analysts from Berenberg stated on Thursday that the geopolitical conflicts surrounding these metals would stimulate investment in non-Chinese supply chains, with companies like Rainbow expected to gain from it.
Executives in the automotive sector have repeatedly indicated that their stock of rare earth magnets would last just a few weeks to a couple of months.
An exception is Hyundai, as the South Korean automaker and its partner Kia have informed investors they have rare earth reserves that will last until at least the year-end, according to sources familiar with the discussions.
“As standard practice, we keep adequate inventory to ensure ongoing production. However, we do not disclose specific inventory numbers or procurement strategies,” Hyundai stated.
Even with non-Chinese rare earth sources, most magnet production still happens in Asia.
“Unless Europe takes significant steps towards producing permanent magnets, the issue won’t be resolved,” an executive remarked.
Recently, Beijing agreed to expedite the approval process for rare earth export licenses for some European firms after warnings that its new licensing framework might lead to widespread factory closures and disruptions in global supply chains.
However, industry leaders have noted that manufacturers might still encounter delays in receiving their rare earth and magnet shipments due to a backlog in license applications.
For companies like Volkswagen that have already obtained a license from China, the receipt of shipments could still take several weeks or even months, they added.
Additional reporting by Song Jung-a in Seoul
