BEIJING (BRAIN) — China is considering restricting the export of rare-earth magnets in response to the trade war with the U.S. A restriction could throw a big wrench into the e-bike market, because the magnets are a critical part of all e-bike motors and China controls much of the world's supply.
E-bikes have already been drawn into the trade war, with a 25% tariff on China-made models imposed last summer. The European Union also has put large anti-dumping duties on Chinese e-bikes, forcing many European brands to move production out of China.
But if China restricts the magnets, it wouldn't matter where the motors or bikes are made. Magnet prices would skyrocket.
"If China decides to choke the supply, or raise the price, of these materials, the price of a truly good e-bike will be much higher," said Ed Benjamin, an e-bike industry consultant. "And it is possible that there would be limited supply of such bikes at any price. And while e-bikes are pretty much below the radar of U.S. officials, the Chinese are keenly aware of them, and regard them as a product that they developed and that have a special place in their national pride."
Permanent magnets made from the rare-earth mineral neodymium are criticial elements of the DC motors. Rare-earth magnets also are a critical element in automobiles, generators and electronics, including headphones and hard drives.
Last year 80% of the rare earths mined worldwide came from China. China also has 36% of the world's reserves of the minerals, according to the U.S. Geological Survey. The U.S. has about 1.2% of the world's reserves.
The editor of China's Global Times tweeted Wednesday that restrictions are on the table.
Based on what I know, China is seriously considering restricting rare earth exports to the US. China may also take other countermeasures in the future.
— Hu Xijin 胡锡进 (@HuXijin_GT) May 28, 2019
In a China Central Television website commentary Wednesday under the headline U.S. risks losing rare earth supply in trade war, it was written, "China has reiterated its stand in promoting multilateralism and tried to avoid a trade war that hurts public interests. But if necessary, China has plenty of cards to play."
Neodymium magnets are the strongest permanent magnet commercially available, according to the Handbook of Modern Sensors: Physics, Designs and Applications by Jacob Fraden.
Benjamin said in addition to the magnets, copper is the other costly motor component. Without using neodymium, ceramic magnets would have to be used, resulting in a heavier and lower-performance bike, Benjamin said.
"And it would take time for motor-makers to tool up for motors that use ceramic magnets," he said. "Most motors are made in China. Most motor factories are in China. Building a new factory or revitalizing an old one is probably a two-year or more process."
On Wednesday, shares of China's JL Mag Rare-Earth increased 10.01%, and shares of one of the only rare-earth mines outside China, Lynas in Australia, experienced a 15.48% jump.
"This is a political move, which has not yet happened, to counter the Trump tariffs, and other political issues between the U.S. and China," Benjamin said. "If we had better politics, wiser and more skilled politicians, we probably would not have this problem looming."
