China's new export controls on seven rare earths are causing unrest in the industry. But instead of just reacting to temporary bottlenecks, it is worth taking a strategic look ahead: what can be learnt from the current situation and what measures will help to better manage supply risks in the future?
The export of Dysprosium, Terbium, Yttrium, Gadolinium, Samarium, Lutetium, Scandium and its various connections has been only possible with official authorisation. The recent tightening of restrictions on the export of rare earths from China is not an isolated case. Rather, they are an expression of a development that has been emerging for years: Raw materials are becoming an instrument of political power. For companies, this means now at the latest: Security of supply is no longer guaranteed. What is needed is a critical look at one's own starting position and the willingness to make strategic changes.
Identify affected materials and supply chains
A structured analysis of your own supply chain shows which materials and connections are specifically affected, where critical dependencies exist and where short-term opportunities for action arise. Those who create this transparency at an early stage can react in a more targeted manner, for example by making customised enquiries and searching the market for available materials.
Clarify requirements for export licences internally and externally
Detailed information on the intended use is required for a Chinese export licence, in particular in which end product the rare earths are to be found. Companies should now actively approach their suppliers and ensure that they receive all the necessary information. This also includes creating internal transparency: Which products contain affected materials and where are they used by consumers? By collating and passing on this data point by point, suppliers can speed up the application process and increase the chances of success in a timely manner.
Better understanding of value chains
Rare earths go through several processing stages: from extraction and chemical separation to alloying and further processing into components such as magnets. The current export restrictions and impending bottlenecks do not just affect a single product, but range from oxides to finished magnets. Companies that understand this value chain can categorise their specific risks more precisely and search for alternatives or available stocks on the market in a more targeted manner.
Raw material issues are central to overall risk management
In many companies, critical raw materials are still purchased purely on the basis of demand, and their strategic importance is often not taken into account. Today, the availability of materials and their price fluctuations have a significant influence on access to markets and the competitiveness of companies and their products. It is therefore worth prioritising the issue internally: as a fixed component of risk management.
Build up strategic stocks
In the past, Beijing has repeatedly surprised with export controls introduced at short notice that apply to both individual raw materials and certain product groups. Experience with Beijing's Export restrictions for gallium and germanium in summer 2023 show: It often takes several months between the announcement, the issuing of licences and the actual export. A realistic time frame for a raw material buffer is therefore three to six months. It depends on the material and the intended use. Those who plan ahead here, i.e. have a Strategic warehousing can avoid interruptions to production if approval processes are delayed.
Making risks visible, creating security of supply
Export controls, licence obligations, geopolitical tensions - the factors influencing the raw materials trade are increasing. Companies are well advised to take a structured look at their raw materials supply and the associated dependencies. Those who draw the right conclusions now will remain capable of acting in an increasingly dynamic environment.
