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China curbs export of five new rare earth elements

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New rules come weeks ahead of Trump-Xi meeting

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Foreign producers who use Chinese tech, material required

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comply

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Foreign semiconductor users will face more scrutiny

(Recasts to include new Chinese rare earth restrictions)

BEIJING, Oct 9 (Reuters) - China tightened its rare

earth export controls on Thursday, saying it planned to limit

exports to overseas defence firms and semiconductor users and

adding five rare earth elements to its list.

The world's largest rare earth producer also added dozens of

pieces of refining technology to its control list and announced

rules that will require compliance from foreign rare earth

producers who use Chinese materials.

The Ministry of Commerce's announcements follow U.S.

lawmakers' call on Tuesday for broader bans on the export of

chipmaking equipment to China.

They expand controls Beijing announced in April that caused

shortages around the world, before a series of deals with Europe

and the U.S. eased the supply crunch.

The new curbs come weeks ahead of a scheduled face-to-face

meeting between U.S. President Donald Trump and Chinese

President Xi Jinping in South Korea.

"This helps with increasing leverage for Beijing ahead of

the anticipated Trump-Xi summit in (South) Korea later this

month," said Tim Zhang, founder of Singapore-based Edge

Research.

China produces over 90% of the world's processed rare earths

and rare earth magnets. The 17 rare earth elements are vital

materials in products ranging from electric vehicles to aircraft

engines and military radars.

Exports of 12 of them are now restricted after the Ministry

of Commerce added five - holmium, erbium, thulium, europium and

ytterbium - along with related materials.

Foreign companies producing some of the rare earths and

related magnets on the list will now also need a Chinese export

licence if the final product contains or is made with Chinese

equipment or material. This applies even if the transaction

includes no Chinese companies.

The regulations mimic rules the United States has

implemented to restrict other countries' exports of

semiconductor-related products to China.

It is unclear how Beijing intends to enforce its new regime.

The ministry also added dozens of pieces of mining and

refining equipment and materials to its control list.

China's latest restrictions on the five additional elements

and processing equipment will take effect on November 8, just

before a 90-day trade truce with Washington expires.

The rules on foreign companies that make products using

Chinese rare earths equipment or material are to take effect on

December 1.

Shares in China Northern Rare Earth Group, China

Rare Earth Resources and Technology and Shenghe

Resources surged by 10%, 9.97% and 9.4%,

respectively, on Thursday.

CHIPS AND DEFENCE

The ministry also said overseas defence users will not be

granted licences, while applications related to advanced

semiconductors will be approved on a case-by-case basis.

The new rules apply to 14-nanometer chips or more advanced

chips, memory chips with 256 layers or more, and equipment used

in production of such chips, as well as to related research and

development. These advanced chips are used in products from

smartphones to AI chipsets that require powerful computing

performance.

The rules will also apply to research and development of

artificial intelligence with potential military applications.

South Korea, home to major memory chipmakers Samsung

Electronics ( SSNLF ) and SK Hynix ( HXSCF ), is assessing

the details of the new restrictions and will continue

discussions with China to minimise their impact, its industry

ministry said in a statement to Reuters.

Samsung declined to comment. SK Hynix ( HXSCF ) and Taiwan's TSMC

did not immediately respond to questions.

Shares in TSMC rose 1.8% on Thursday, as the company

reported forecast-beating third-quarter revenue. South Korea's

financial markets were closed on Thursday for a public holiday.

Chinese rare earth shipments have been growing steadily over

the past few months as Beijing grants more export licences,

although some users still complain they are struggling to obtain

them.

In a nod to concerns about access, the ministry said the

scope of items in its latest restrictions was limited and "a

variety of licensing facilitation measures will be adopted".