Car companies are in 'full panic' as China blocks rare-earth magnets

Auto companies are feeling the hit from recent Chinese export controls on rare earth magnets.

Reuters reported on Monday that auto executives are scrambling to find back-up sources for the magnet shortage that’s hindering supply chains. In addition to slowing export licenses, Beijing introduced a mandatory online tracking system for rare earth magnet producers. The system requires companies to report trading volumes and disclose client names.

China has a virtual monopoly on the market. The country produces 90% of the rare-earth magnets that are critical to the production of car motors, brakes, and steering mechanisms. It’s also important within the defense and energy sectors.

American auto suppliers also sent a letter last week urging the Trump administration to take immediate steps to address Chinese export controls, which are beginning to lead to shortages.

There are signs of a thaw on the restrictions in the near future. President Donald Trump said Friday that Chinese President Xi Jinping gave the green light to allow rare earth magnet exports to the U.S. One day later, the Chinese Ministry of Commerce approved establishing a separate channel to fast-track export license applications for European Union firms, CNBC reported.

Chinese and U.S. trade negotiators are scheduled to meet Monday in London for another round of negotiations. The fragile truce between both countries remains in place for now, but U.S. officials say they want to restore rare earth magnet shipments to pre-trade war levels.

“We want the rare earths, the magnets that are crucial for cell phones and everything else, to flow just as they did before the beginning of April,” White House National Economic Council Director Kevin Hassett told CBS News on Sunday.

—Shannon Carroll contributed to this article.