China imposes export licensing on seven heavy and medium rare earths

Mechanism

Items covered (per MOFCOM Announcement No. 18 of 2025):

• Samarium (Sm) — used in SmCo permanent magnets for

high-temperature aerospace + defence applications

• Gadolinium (Gd) — neutron absorption (nuclear), MRI

contrast agents, GdYAG lasers

• Terbium (Tb) — high-coercivity additive in NdFeB magnets

(EV motors, wind turbines)

• Dysprosium (Dy) — same role as Tb, more critical at higher

operating temperatures

• Lutetium (Lu) — PET imaging, specialty catalysts
• Scandium (Sc) — aluminium-scandium alloys for aerospace
• Yttrium (Y) — lasers, phosphors, oxygen sensors

Notably absent: neodymium and praseodymium, the two largest rare-earth element categories by volume. Western analysts read this as China retaining the option to escalate further if needed — the elements named are precisely those where China's share of global supply is highest (Tb, Dy, Lu all >85% Chinese refined output per USGS 2025) and where Western substitutes are weakest.

Why severity 5

• Supply-share dominance: China supplies >85% of global

refined heavy rare earths. The non-Chinese supply chain (Lynas + small Vietnamese, Malaysian, Australian operations) is insufficient to cover Western EV-motor + wind-turbine + defence demand at current scale.

• Strategic-chokepoint qualifier: even if quant-share of

US-China bilateral trade is small, these are the inputs that go into: - Every NdFeB magnet that needs to operate above ~120°C (EV traction motors, wind turbine direct-drive generators, F-35 actuators) - Every modern PET scanner (Lu-177)

• Trans-shipment closure: licences require named end-users;

re-export to the US through third countries faces heightened scrutiny.

• Timing: April 4 came two days after the Trump April 2

reciprocal tariff package — establishing that China's retaliation playbook now includes rare earths alongside the Dec-2024 Ga/Ge/Sb pattern.

Downstream implications

• US Department of Defense accelerated funding for MP Materials

(Mountain Pass), USA Rare Earth, and Lynas USA's Texas separation facility; allocation amounts in Q2 2025 roughly doubled prior-year run-rate.

• EU Critical Raw Materials Act (filed: 2024-05-23-eu-crma) —

the heavy rare earths named here are explicitly on the Strategic Raw Materials list; the action triggered fast-track permitting reviews on three Strategic Projects in Sweden (Norra Kärr) and Norway.

• Cross-references to the Minerals Atlas:

docs/minerals/materials/neodymium.md (which covers the broader REE supply chain) carries the structural context. A dedicated heavy-REE dossier may be warranted as a follow-up.

• EV manufacturers (Tesla, Ford, GM, VW) telegraphed multi-

quarter inventory pre-buys; some shifted toward induction- motor / ferrite-magnet alternatives where physically feasible (Tesla 2025 Model S/X redesign).

Open questions

• Watch licence-approval rate and average latency for non-US

destinations vs US destinations; this is the leading indicator of whether the licensing regime is a structural control or a negotiating instrument.

• Whether China will extend this to neodymium and praseodymium

is the single most-watched escalation. Probability rises if US adds new entity-list designations or escalates chip controls further in H2 2025.