China rare earth firms halt some US shipments over geopolitical worries, sources say

US officials have repeatedly asked China to stick to commitments made in Busan and Beijing over the past year to ensure the smooth flow of rare earth export licences. The persistence of the problem has put it on the US planning agenda ahead of Xi's September 24 visit, a source familiar with the work said.

A handful of Chinese suppliers have refused to ship rare earths to US companies since early August when China imposed sanctions on the Responsible Business Alliance (RBA), a US supply chain monitor, a separate source with direct knowledge of the situation said.

With China deploying its own trade compliance weapons, the companies were wary of punishment from Beijing for complying with the due diligence framework of the Responsible Minerals Initiative (RMI), a global mineral supply chain audit programme connected with the RBA, the source said.

Other Chinese rare earths companies had already stopped shipments to the US to avoid entanglement in geopolitics in recent months, two other sources familiar with the trade said. One cited four instances where Chinese firms declined to send material for fear it could be resold to banned users.

The sources declined to be named given the issue's sensitivity.

Reuters was unable to determine the total number of Chinese suppliers who had refused to move shipments destined for US clients.

A US official speaking on condition of anonymity told Reuters that the administration continues to press Chinese counterparts to address China’s lack of compliance with the Busan agreement, as well as other bilateral concerns.

TIGHT SUPPLY

While exports of many rare earths or related magnets have rebounded since China imposed restrictions in April 2025, the prices ofcertain rare earths and critical materials like yttrium, indium phosphide and tungsten that have military applications or are used in sensitive industries including aerospace or chipmaking remain near record highs with tight supply.

Other industries affected by licence delays include medical devices and energy.

Exports to the US of yttrium have risen this year but are still only about half 2024 levels despite large shipments to other countries, Chinese customs data shows. Some US companies have been waiting more than six months for mineral licences, said two of the sources, declining to identify them.

"China has been very effective in using rare earth export controls to impose restraint on the Commerce Department's Bureau of Industry and Security," said Reva Goujon, a geopolitical strategist at Rhodium Group, referring to the US agency responsible for various restrictions targeting China.

"Supply chain chokepoints will come into focus, but I would expect Beijing to loosen up critical raw material controls a bit around the summit to deflate US allegations that Beijing is not upholding the Busan truce," Goujon added.

The US Treasury, the US Trade Representative, State Department and China's ministry of commerce did not respond to requests for comment.

China's ministry of foreign affairs said China was committed to maintaining global critical mineral supply chains.

Beijing said its August decision to sanction the RBA and other US auditing firms was a response to a series of FCC restrictions since December targeting Chinese electronics testing labs, drones, consumer routers, submarine cables, advanced robotics equipment and power inverters.

When US officials have raised the rare earths issue in meetings, Chinese officials countered by saying the FCC actions were a violation of the Busan truce, said one of the sources who was briefed on the interaction.

However, after two months without yttrium exports, China sent 27 tons of the material to the US in July, the second-highest monthly shipment since January 2025.

Several US firms also report recently receiving multiple licences after long waits, two sources said, with some firms anticipating an increase in approvals around the summit.

Licence approvals are even more limited for Indian and Japanese buyers, two sources familiar with the matter said. Chinese suppliers are overwhelmingly refraining from shipping material to Japanese firms, one of them said.

Japan's Trade Minister Ryosei Akazawa has previously said Japanese companies have faced delays in permits and prolonged customs inspections for critical minerals including rare earths. His ministry did not immediately respond to a request for comment on Friday

China exported no ‌terbium to Japan between January and August of this year, from 20 tons over the same months last year. Gallium shipments were 65% down in the same period, while yttrium was down 98%, Chinese customs data showed. Gallium and terbium are used in small amounts to make high performance rare earth magnets.

"While processes have been streamlined, our member companies still face issues with implementation," the European Chamber of Commerce in China told Reuters in a statement. "What our members would like to see is a commitment to implement a transparent and predictable application process that provides reliable access to rare earth elements."