Is the magnet control leaking? Rare-earth (NdFeB) trans-shipment after China's Apr-2025 licensing

Trade-flow companion to the price wedge (R72). The wedge measures scarcity (what a controlled material costs ex-China). This case measures the other half: is the control actually holding, or is controlled material re-entering the US through a laundered origin? This is a DUAL-SCORE / alternative-track signal — never folded into any Tier-1 exposure score. The divergence between "who China licensed to" and "who suddenly started shipping magnets to the US" IS the signal. Research, not investment advice; origin-relabelling is INFERRED from statistical implausibility plus public ownership records, never asserted as smuggling on any single shipment.

Live chart + method: [/situation-room → "Is the ban leaking?"](/situation-room).

Verdict — GATE 0 (emerging, muted)

On 4 April 2025 China's MOFCOM (Announcement No. 18) put seven medium/heavy rare earths (Sm, Gd, Tb, Dy, Lu, Sc, Y) under individual export licence; on 9 October 2025 Announcements 61/62 expanded the list to 12 elements and — for the first time — asserted extraterritorial jurisdiction (0.1% de-minimis, FDP, 50%-affiliate) over foreign-made magnets containing Chinese-origin controlled REEs, plus licensing on magnet-manufacturing technology. Then on 7 November 2025 Announcement No. 70 suspended the October package for the US until 10 November 2026 (post-Busan truce).

That control shape — a licence, not a ban, later suspended — is the same structural wrinkle that muted the tungsten and bismuth cases: the classic "banned-origin collapses" leg is largely absent. US customs data confirms it:

Source: UN Comtrade (reporter USA, HS 850511, annual), free public preview API; committed artifact `data/intelligence/remagnet-circumvention.json`. Magnet-capacity shares: USGS MCS 2026 + IEA/Adamas public notes. 2023 is intentionally omitted: US HS 850511 volume drops ~69% uniformly across every origin between 2023 and 2024, the fingerprint of an HS-2022 nomenclature reclassification, so 2023 is not comparable — the clean control comparison is 2024 vs 2025.

Two things stand out, and they point in opposite directions:

1. The relabel *direction* is textbook. The origins that surged ~6–7× from near-zero in the control year — Thailand (in neither the USGS magnet nor heavy-REE tables) and Vietnam (only ~0.5% of genuine sintered-NdFeB capacity) — are exactly the ones that cannot make magnets at that scale, while the two origins that can (Japan, Germany) shrank. When a control bites, legitimate substitution flows to real makers; here it flowed to zero-capacity transit nodes instead. That is the relabel signature. 2. But the magnitude is tiny and China never collapsed. Vietnam + Thailand together are 2.6% of US magnet imports; China's direct line held and even gained share (85% in 2025). The tap was throttled by licence friction, then re-opened by the November truce — not severed. So there was no large gap for a laundered origin to fill, unlike antimony (China −85%) or graphite.

Hence GATE 0: a real but marginal fingerprint, stronger than tungsten (because a named offshore leg exists, below) but far from the antimony/graphite clean signal.

The corporate pipe (a mode-B relocation candidate, partially traced)

The strongest tell here is capacity relocation (mode B — the graphite/BTR pattern), not pure relabelling. Chinese magnet maker Baotou INST Magnetic (包头韵国磁业 — based in Baotou, the heart of China's rare-earth industry; an Apple supplier) began operating a leased magnet facility in northern Vietnam in 2025 after downstream clients asked for supply diversified away from China (Nikkei / Asia Financial reporting). A Chinese-owned magnet leg in exactly the country whose US magnet line jumped +662% in the control year is the capacity-relocation fingerprint — Chinese ownership, new flag.

Honest limits on this pipe:

• Vietnam's magnet build-out also includes a legitimate, non-Chinese leg:

South Korea's Star Group Industrial (SGI) is standing up ~5,000 t/yr of NdFeB in Vietnam. Some of the Vietnam→US line is genuine allied capacity, not Chinese re-routing.

• No public bill-of-lading trace confirms Baotou INST's Vietnam output is the

specific driver of the Vietnam→US surge. It is presented as a mode-B candidate, not an asserted laundering pipe.

• The $/kg is low on the Vietnam and Thailand lines (~$15 and ~$22/kg vs

China's ~$42 and Japan's ~$142), consistent with mixed or lower-grade magnets rather than purely the high-value heavy-REE NdFeB the control targets.

The controlling state agrees the mechanism is real

Corroborating the generic mechanism: China's own General Administration of Customs launched a special anti-smuggling campaign from May 2025 against strategic-mineral export smuggling, explicitly targeting "third-country laundering" and mis/under-declaration. Administrative export-control enforcement cases rose from 91 (2024) to ~317 (2025), with the first-ever fines above RMB 1 million (top ~RMB 6.34M). The controller publicly confirms that third-country relabelling of controlled minerals is happening — though GACC has not published a rare-earth-specific Thailand/Vietnam breakdown, so we do not attribute the Comtrade surge to that campaign beyond what the flow data shows.

The upstream lines confirm "control bit, gap mostly unfilled"

• RE metals, unwrought (HS 280530): China's US share fell 99.2% (2023) →

77.8% (2025) and world volume crashed from 400 t to 80 t (2024) before a partial 140 t recovery — the control bit hard, but no implausible surger appeared; the gap was simply unfilled. Scarcity, not laundering.

• RE compounds/oxides (HS 284690): China's ~80% US share barely moved and its

volume rose in 2025; the only sizeable non-China origin is Malaysia (Lynas LAMP, 6–14% — genuine ex-China separation). No relabel signal on oxides.

So the leakage, such as it is, shows up only in the finished-magnet line and only through zero-capacity SE-Asian origins — consistent with China holding the upstream chokepoint while a thin downstream relabel/relocation leg opens.

Why it matters for the buyer

1. A muted fingerprint is still a warning about *where* to look. A risk team should not read China's rising 2025 magnet share as "the control failed." It means the control was negotiated away (the Nov-2025 truce), and the small Vietnam/Thailand surge marks the corridor that would carry the volume if the November-2026 expiry cliff re-imposes controls. 2. The mode-B leg is the durable one. A licence can be suspended overnight; a Chinese-owned magnet plant in Vietnam is a physical asset that keeps a "new-flag" origin available regardless of the licensing weather. Watch Vietnam magnet capacity, not just the licence text. 3. Official bilateral data is only mildly misleading *here* — for now. Unlike antimony (where "US no longer buys from China" was flatly false), the magnet dependency still wears a Chinese label. The trans-shipment risk is latent, waiting on the 10-Nov-2026 cliff.

Method & honesty rails

• Trade data: UN Comtrade, US imports, annual, HS 850511 (permanent magnets),

280530 (RE metals), 284690 (RE compounds). Net weight is gross product weight. 2025 blends the Apr–Nov control window with a clean Q1 and a post-suspension December; monthly data (US-bound magnet shipments reportedly fell ~93% in May-2025 before recovering) would sharpen the dip-and-recover the annual view smooths.

• Alternative-track only: never touches buyerRelativeScore or the base

exposure — it sits next to them, like the China–West price wedge.

• Inference, not accusation: relabelling/relocation is inferred from an

origin's ~zero magnet capacity plus public ownership reporting. No individual shipment is asserted illegal beyond what the cited public record states.

• Why GATE 0, explicitly: the controlled origin did not collapse (licence +

truce, not ban); the surge origins are real in direction but small in share; the ownership pipe (Baotou INST → Vietnam) is a partially-traced mode-B candidate mixed with legitimate Korean capacity. GATE 1 would need monthly Comtrade isolating the mid-2025 dip-and-reroute and a bill-of-lading trace tying a named Chinese magnet maker's Vietnam plant to the US-bound surge.