Call it a “chip shortage on steroids.” That’s how one expert told CNN the auto industry is describing a possible shortage of rare earth elements — minerals that are now center stage in the global trade war. Running low on those minerals could recall the pandemic-era chip shortage that jacked up car prices, used and new, across America. China has a virtual monopoly on those 17 metallic elements, which are critical components to everyday products from cars to jet engines to electronics like smartphones and flat-screen TVs. They’re even crucial for the contrast dye used in MRI machines and some cancer drugs. And, recently, China made it even harder to get them: The country introduced a new licensing requirement on the export of the elements in April, effectively slowing the flow of outbound shipments to most of the world, including the United States. Delegations from the US and China are meeting in London this week to talk about a new trade deal, and rare earths are almost certainly a major part of those discussions. Right now, US companies have only about two or three months’ worth of supply, according to Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic and International Studies. After that, “industry simply could not manufacture” unless an agreement is reached between the US and China, she told CNN. President Donald Trump told reporters Friday that Chinese President Xi Jinping had agreed to allow exports of rare earth minerals products to begin. But even that promise might not be enough for US manufacturers if a new deal only lifts the restrictions temporarily, said Baskaran. “It makes it extremely difficult for industry to get a reliable read on what the next three months, six months or a year are going to look like,” she said. Nor might exports flow fast enough compared to past levels. “Keep in mind that prior to the (Trump-Xi) call, they were beginning to flow out, but not at the pace that allows supply chains to continue without interruptions,” she added. US companies might soon burn through stockpiled inventory, according to Baskaran. One auto industry expert, who asked not to be identified because they aren’t authorized to speak publicly, told CNN it is becoming apparent that the auto industry is prepping for widespread shutdowns in the coming months due to rare earth shortages. It’s something the expert has heard described by people in the industry as “the chip shortage on steroids.” Four years ago, a shortage of computer chips caused halts in auto production, which fueled record car prices. The limited supply drove most people to pay above sticker price for new cars. “People think that it’s only EVs (electric vehicles), but it’s not,” the expert told CNN. “It’s in everything in every car. It’s in the motors that run windshield wipers. One supplier I’m talking to said there are sensors in seat belts. I think there’s going to be production disruptions all over the place. China really has our balls in a vise.” Ford already had to shut down production at the Chicago plant that builds the Explorer for a week, according to Baskaran. Ford would neither confirm nor deny the shutdown was caused by a rare earth shortage. Reuters, citing sources with knowledge of the situation, reported that suppliers of major American carmakers – including General Motors, Ford and Jeep-maker Stellantis – were granted temporary export licenses for rare earths, but only for a period of up to six months. The companies would not comment on their supplies of the minerals. Agreement needed With rare earths so critical to important US industries, there are efforts to find replacements, such as other types of magnets and electric motors that don’t use magnets at all, said Roderick Eggert, a professor at the Colorado School of Mines and deputy director of the Critical Materials Innovation Hub, a research consortium established by the Department of Energy. But Eggert said those alternatives all have shortcomings. “These substitutes come at the cost of performance,” he said. “Motor designs that don’t use magnets at all, those tend to be less efficient.” He said that the only hope to avoid significant disruptions is that the China and US reach an agreement that will restore the normal flow of rare earths. “It is in the interest of the Chinese to remain a stable and trusted source for rare earths magnets and other rare earths products,” Eggert said. “Unfortunately, what has happened is that rare earths have gotten caught up in much larger tensions associated with US-China trade negotiations.” The name rare earths is a bit of a misnomer. The materials are found throughout the Earth’s crust but are difficult and costly to extract and process. China has the only equipment needed to process some of the various elements and currently controls 92% of the global output in the processing stage. Other countries, including the United States, are rushing to create their own processing capabilities. But that will take months, if not years. Baskaran said more should have been done to prepare for this scenario in advance. “Of course we should have seen this coming,” she said. “We should have started this 15 years ago.”
The rare earths problem: Why it could soon be harder to get a car, electronics or even an MRI
TruthLens AI Suggested Headline:
"Concerns Rise Over Potential Shortage of Rare Earth Elements Impacting Key Industries"
CNN
7.9
TruthLens AI Summary
The potential shortage of rare earth elements is raising alarms in various industries, particularly in the automotive sector, which is likening this situation to a "chip shortage on steroids." Rare earth elements, consisting of 17 critical minerals, are integral to the production of numerous everyday items, including automobiles, electronics, and medical devices. Currently, China dominates the market for these minerals, controlling approximately 92% of the global output in processing. The situation worsened in April when China implemented new licensing requirements for the export of rare earths, significantly reducing the flow of these essential materials to countries like the United States. As a result, American companies are estimated to have only a two to three month supply of these elements left, creating a sense of urgency for a resolution in ongoing trade negotiations between the US and China. Experts warn that without a timely agreement, the industry may face severe production disruptions, reminiscent of the pandemic-era chip shortages that previously inflated car prices nationwide.
Industry insiders indicate that the automotive sector is bracing for potential shutdowns due to these shortages. The ramifications of rare earth scarcity extend beyond electric vehicles; they affect all vehicles, as these minerals are found in various components, from motors to safety features. Reports suggest that companies like Ford have already experienced production halts, although Ford has not confirmed these claims. Meanwhile, efforts are underway to identify alternative materials that could replace rare earth elements, but experts caution that substitutes often come with performance trade-offs. The urgency of the situation is underscored by the fact that while the US is striving to develop its own processing capabilities, this will take considerable time. Analysts emphasize that the US and China must reach a stable agreement to prevent significant disruptions in the supply chain, as the current geopolitical tensions continue to complicate the matter. The complexity of the rare earth supply chain highlights the need for proactive measures that should have been initiated years ago to mitigate such vulnerabilities in critical industries.
TruthLens AI Analysis
The article outlines the potential consequences of a looming shortage of rare earth elements, which are crucial for various industries, particularly automotive and electronics. The narrative draws parallels with previous supply chain disruptions experienced during the pandemic, highlighting the fragility of global supply chains and the geopolitical tensions surrounding these critical materials.
Geopolitical Tensions and Supply Chain Vulnerabilities
The mention of China's monopoly on rare earth elements emphasizes the geopolitical stakes at play. As the world's largest supplier, China's recent export restrictions exacerbate concerns about supply shortages in the U.S. and other countries. The article suggests that these restrictions could lead to significant challenges for manufacturers, indicating that the U.S. is in a precarious position regarding its supply chain dependencies. This situation may create a sense of urgency for a new trade agreement between the U.S. and China, making the outcome of their discussions in London critical.
Public Perception and Economic Implications
By framing the situation as a “chip shortage on steroids,” the article aims to evoke a sense of alarm among readers. This language choice could generate anxiety about prices for cars and electronics, potentially leading consumers to alter their purchasing behavior. It may encourage public discourse around the importance of domestic production of rare earth elements and the need for strategic planning in the face of international trade challenges.
Hidden Agendas and Economic Manipulation
While the article highlights genuine concerns about supply shortages, it may also obscure the broader implications of these shortages for innovation and economic growth. The focus on immediate scarcity could detract from discussions on potential solutions, such as developing alternative materials or investing in domestic mining operations. The emphasis on U.S.-China relations may also serve to distract from other pressing issues in the global economy.
Trustworthiness and Reliability
The information presented appears credible, drawing on expert insights and current geopolitical developments. However, the framing and language choices may introduce a degree of sensationalism. The article effectively communicates the seriousness of the issue while potentially exaggerating the immediacy of the crisis.
Connection to Broader Narratives
This article aligns with broader narratives concerning global supply chain disruptions and international trade conflicts. It resonates with ongoing discussions about U.S. dependence on foreign materials and the need for resilience in supply chains. By linking the current situation to previous shortages, it underscores a pattern of vulnerability that could inform policy debates.
Market Impact and Investment Concerns
Given the potential for supply shortages to impact various industries, this news could influence stock market dynamics, particularly for companies reliant on rare earth elements. Investors may react by reassessing the viability of certain sectors, especially automotive and technology. This could lead to fluctuations in stock prices as companies navigate these challenges.
Global Power Dynamics
The article touches on significant themes in global power dynamics, particularly the influence exerted by China over critical resources. As the U.S. seeks to negotiate trade terms, the outcomes could have far-reaching implications for economic stability and international relations.
In conclusion, the article serves to inform the public about the critical situation surrounding rare earth element supplies while also reflecting deeper geopolitical tensions and economic vulnerabilities. The language and framing employed may seek to heighten awareness and urgency regarding these issues.