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China controls 70% rare-earth mining, 85% refining

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Rare-earth-free motors are years from mass production

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China pricing undermines new rare-earth mines abroad

By Nick Carey and Christina Amann

LONDON/BERLIN, Oct 21 (Reuters) - Global automakers are

scouring the globe for crucial rare earths ahead of looming

Chinese export controls, with executives worried they could lead

to parts shortages and plant closures.

Rare earth magnets power motors in car parts such as side

mirrors, speakers, oil pumps, windshield wipers and fuel leakage

and braking sensors. They play an even bigger role in EVs.

While a U.S.-China deal diverted a supply threat, stockpiles

were depleted by similar restrictions earlier this year, while

Beijing has also made it harder to get export licenses.

China has since dramatically expanded export curbs, with

companies facing global supply shortages.

Consultancy AlixPartners estimates China controls up to 70%

of global rare-earths mining, 85% of refining capacity and about

90% of rare-earths metal alloy and magnet production.

The new Chinese export control list includes elements like

ytterbium, holmium and europium, also used in making cars.

"The situation is very tense," said Nadine Rajner, CEO of

German metal-powder supplier NMD, adding customers want to

source rare earths from anywhere but China.

Rajner said that while there are plenty of rare earths

available in countries like Sweden, they do not have the mines

or refining capacity to make them usable. And for heavy rare

earths, China controls 99.8% of global refining capacity, making

alternative sources negligible.

"We are pretty much sold out and have limited stocks,"

Rajner said.

Rare earths can be recycled from old cars, but that industry

is in its infancy. Neutral, a Renault-backed company, currently

recycles rare earths from 400,000 cars a year in France and has

contracts with 15 brands in Europe.

But "the challenge is scaling up these activities," said

Neutral CEO Jean-Philippe Bahuaud.

'ALREADY BEEN DEPLETED'

Even if Chinese suppliers can fulfil fresh orders before the

November 8 export controls take effect, the journey by sea to

Europe can take 45 days and the threat of a rare earth

bottleneck is among several headaches facing the auto industry.

China has also placed export restrictions on lithium-ion

batteries and battery materials, triggering concerns over parts

supplies for electric vehicles.

And last week, an intellectual-property dispute between

China and the Netherlands involving little-known Dutch

chip-maker Nexperia, sparked fears of factory closures because

it supplies a large amount of chips car parts and components.

Automakers also face the challenge of U.S. tariffs and are

expected to detail the costs in their third-quarter earnings.

But China's hold over the industry through its control of

rare earths ranks among the thorniest problems.

"They can shut us down in two months, the entire auto

industry," said Ryan Grimm, Toyota Motor's ( TM ) North

America group vice president of purchasing supplier development.

Bruno Gahery, president for France, Benelux, West and South

Europe at supplier Bosch, said he expected the autos

industry to "overstock rare earths" ahead of the deadline.

But an executive at a magnet supplier for Hyundai

said that while it built inventories earlier this

year, "most have already been depleted" and supplies are tight.

Some Chinese rare earths exporters received a rush of orders

from overseas clients immediately after new export controls were

announced on October 9, three industry sources told Reuters.

RARE EARTH FREE MOTORS

Automakers are taking steps to reduce their reliance.

Some such as General Motors ( GM ) and major suppliers such

as ZF and BorgWarner ( BWA ) are developing EV motors

with low-to-zero rare-earth content, while BMW and

Renault have produced rare earth-free motors.

Monumo has used AI and deep-tech simulation to help clients

cut rare earth content in motors already in production, which

CEO Dominic Vergine said has led to an average reduction of 24%

among the UK firm's customers, which include several of the

world's top 10 carmakers, he said.

Automakers are also pushing hard to improve rare earth-free

motors for the next generation of EVs.

Yet most of those motors are years away, as are efforts to

develop new rare earth mines and processing plants outside

China, which Beijing can undermine by keeping prices low,

industry experts say.

Experts say the U.S government is taking the threat far more

seriously than Europe.

Andy Leyland, co-founder of supply chain specialist SC

Insights, said Beijing has focused on beating others on price

and will continue to do so.

"The Chinese can always undercut them," he said of efforts

to develop rare-earth free motors, adding that faced with

cheaper motors with rare earth magnets automakers may find it

hard to justify more expensive components.

"So it's a really risky investment."

Meanwhile, China is expected to keep exerting its power over

supplies of rare earths.

"This is not the end of export controls," said Jan Giese, a

senior manager at rare-earth trader Tradium.