As export controls bite and demand surges, China warns foreign buyers against building large inventories, stoking a fresh scramble from EVs to defense.

Vienna – China has privately warned Western companies against stockpiling rare earths and related products, according to people familiar with the matter, cautioning that aggressive inventory building could trigger even tighter supplies. The message, conveyed this week against the backdrop of a fragile U.S.–China tariff truce, underscores Beijing’s resolve to keep firm control of the materials that underpin electric vehicles, wind turbines, advanced electronics and a swath of civilian and defense systems.

Why this warning matters

Rare earth elements (REEs) and the high‑performance magnets made from them are foundational to the clean‑energy transition and modern warfare. Beijing already exerts outsized influence over the market: China dominates global processing and magnet manufacturing, and its licensing regime for exports has become a critical point of leverage in a broader strategic and economic rivalry with the West.

For manufacturers—from Detroit and Wolfsburg to Osaka—the prospect of being told not to build buffer stocks is jarring. Many companies began accumulating inventories after export rules tightened in April, when Chinese authorities introduced new controls on several medium and heavy rare earths, including dysprosium and terbium—elements vital to high‑temperature magnets used in EV motors and missile guidance systems.

How Beijing is tightening the taps

Officials and industry executives say the warning is accompanied by a more stringent approval process for export licenses and stricter quota management. Customs officers and commerce regulators have subjected some shipments to prolonged reviews, while exporters report requests for additional documentation and end‑use assurances. The result has been slower flows, longer lead times and—according to traders—sporadic denial of permits for large batch orders perceived as ‘hoarding.’

China’s move follows months of tit‑for‑tat trade actions. On April 4, Beijing added export controls on seven medium and heavy rare earths, citing national security. A 90‑day tariff ceasefire with Washington briefly eased tensions in May and was renewed this week, but the underlying contest over critical materials has only intensified.

The scramble it sets off—again

The immediate fallout is twofold. First, pricing power shifts back toward suppliers with licenses and established customer relationships, while spot buyers face premiums. Second, multinational manufacturers are revisiting their playbooks: relocating final assembly to China to keep inputs onshore; qualifying alternative materials where technically feasible; and accelerating projects that diversify supply beyond China—even if costs rise.

In the United States, policymakers have poured hundreds of millions of dollars into rebuilding a domestic rare‑earths chain, from mine to magnet. MP Materials has begun producing NdFeB magnets in Texas and, backed by a new Pentagon partnership, is expanding capacity while inking long‑term offtakes with blue‑chip customers. Australia is pushing downstream processing through projects such as Lynas’ Kalgoorlie facility and Iluka’s Eneabba refinery, slated to produce separated oxides later this decade. Europe, meanwhile, is nudging investors with its Critical Raw Materials Act, though the bloc still lacks large‑scale magnet manufacturing.

Stockpiles are back in fashion—but risky

Stockpiling is a classic response to supply risk, yet it can be self‑defeating. When multiple buyers move simultaneously, inventories rise, visible supply tightens and prices spike—inviting precisely the curbs Beijing wants to prevent. That paradox is now at the heart of the standoff: Western companies argue they need buffers to keep factories running; Chinese regulators warn that outsized orders will trigger even stricter licensing and lower quotas.

Some governments are considering or expanding strategic stockpiles managed by public agencies rather than private firms, coupled with transparent release rules to dampen panic buying. Industry groups also advocate ‘allocation‑based’ contracts that smooth deliveries over time, and greater reuse: magnet recycling is gaining traction as a partial hedge, even if secondary feedstock volumes remain modest relative to demand growth.

What’s actually controlled—and what isn’t

China’s controls differ across the supply chain. Today’s tightest choke points are in processing and magnet making. While mining is geographically more diverse, the conversion of ore into separated oxides and metals remains concentrated in China, particularly for heavy rare earths. April’s measures focused on export licensing for seven REEs often used in high‑temperature magnets, rather than a blanket ban on all rare earth trade. Officials retain discretion to approve shipments case‑by‑case, which is precisely where the new ‘no hoarding’ guidance is being felt.

What companies should do next

Procurement teams now face a more complex risk calculus. The old playbook—buy extra and wait out the storm—may invite regulatory pushback. More sophisticated approaches are emerging: multi‑sourcing with staggered deliveries; contracting for recycled content; financing upstream projects in friendly jurisdictions; and designing products to use less dysprosium and terbium by adopting grain‑boundary diffusion or motor designs that tolerate higher temperatures.

The policy message is equally clear. Without magnet‑grade processing and finishing capacity outside China, efforts to onshore mining will have limited impact. Bridging that gap requires coordinated public‑private investment, patient capital and, for defense uses, price‑floor guarantees that make domestic output viable through cycles. Absent such measures, periodic licensing squeezes will keep reverberating through EV, wind and aerospace supply chains.

The outlook: leverage meets physics

A durable détente is unlikely soon. Even with a tariff truce, rare earths sit squarely at the intersection of industrial strategy and national security. As heat waves, election calendars and military procurement timetables all tug on demand, Beijing’s ability to modulate exports gives it immediate leverage, while Western plans to rewire supply chains will take years. The warning against stockpiling is less an isolated signal than part of a predictable rhythm: tighten, observe, adjust. For boardrooms and cabinets alike, the lesson is the same—build resilience now, because the next squeeze may arrive with little notice.

Editor’s note on sources

This article draws on recent reporting that Chinese authorities have cautioned Western companies against stockpiling rare earths; on April 2025 regulatory notices detailing export controls on selected medium and heavy rare earths; and on public announcements and analyses of Western efforts to expand processing and magnet manufacturing capacity in the United States, Australia and Europe.