Highlights

• Despite the Trump-Xi truce, China ships finished permanent magnets to the US while selectively blocking critical raw materials like dysprosium needed for domestic production.
• US manufacturers can buy magnets but cannot build independent supply chains, as 50,000 tons of global magnet production outside China lacks necessary rare earth feedstock.
• China's strategy preserves downstream product flow while maintaining upstream processing leverage, with temporary six-month licenses creating uncertainty as expiration nears.

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When headlines declared a thaw after the October Trump–Xi truce, markets expected rare earth tensions to ease. A closer look suggests otherwise. Reporting by The Japan Times (opens in a new tab) (via Bloomberg) reveals a more surgical reality: China is shipping finished permanent magnets to the U.S., while raw rare earth inputs needed to make those magnets domestically remain selectively constrained. For investors and policymakers, this distinction is the whole game.

What’s Moving—and What’s Not

On the surface, China appears compliant. Customs data show overall exports of rare earth products rising month over month, and finished magnets reaching U.S. buyers. But market participants—producers, consumers, and trade officials—say critical oxides and metals, notably dysprosium, remain effectively unavailable to U.S. entities under current licensing practices.

The result is structural. U.S. manufacturers can buy magnets, but cannot build the supply chain. As Noveon Magnetics CEO Scott Dunn puts it, the world outside China may assemble roughly 50,000 tons of magnets, but lacks the rare earth minerals to support that output without Chinese feedstock.

The Deal’s Fine Print (and Its Gaps)

Administration officials maintain China is complying with the agreement. Beijing echoes that message, calling monthly trade swings “normal” and citing approvals for some export licenses—while reserving the right to restrict shipments tied to military end users.

On the Money

• Magnet shipments to the U.S. are above spring lows.
• Overall, Chinese rare earth exports rose ~13% month over month in November.
• EU buyers report longer-term licenses, suggesting differentiated treatment.

Gaps

• A durable framework for general licenses to the U.S.
• Clarity on renewals as six-month temporary licenses near expiration—raising fears of backlogs and administrative slowdowns that function as de facto controls.

Why This Matters for the Supply Chain

This is not a contradiction; it’s a strategy. By easing downstream products while constraining upstream materials, China preserves stability for autos and electronics while maintaining leverage over processing and separation—the hardest steps to replicate.

As the Center for Strategic and International Studies notes, importing further down the chain cushions immediate shocks, but delays the domestic capability-building Washington says it wants.

REEx Reaction

China isn’t breaking the truce; it’s interpreting it. Magnets flow. Oxides don’t. Until the U.S. secures reliable access to upstream inputs—or builds processing at scale—the leverage remains firmly upstream.

Source: The Japan Times / Bloomberg (Joe Deaux)

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