Estonia's Neo Silmet in focus as China keeps rare earths flowing to the EU

China has said rare earth supplies for European factories will continue no matter what happens in its separate trade arrangement with the United States. Spokesperson He Yadong of the Commerce Ministry told CNBC that Beijing stands ready to keep approving export licenses for the EU. The comments came days after talks in the Chinese capital and addressed a January deadline tied to a U.S.-China trade truce, separating Europe's access from Washington's fate. The move is an administrative easing inside a system Beijing still fully controls.

The backdrop is months of friction. In April 2025 China imposed licensing requirements on several heavy rare earth elements. Exports dropped sharply. Companies from Germany to France saw inventories thin and prices outside China climb. A second wave of restrictions was suspended for a year, and that pause ends on November 10. European officials have spent the intervening months pressing for guarantees.

Those efforts produced results in Beijing on October 8 and 9. European Commissioner for Trade and Economic Security Maroš Šefčovič met Chinese Commerce Minister Wang Wentao. A joint statement set out 16 points of consensus, including continued use of a so-called green channel, or fast-track process, for rare earths and permanent magnets bound for European end users. As detailed by 2eu.brussels, China agreed to facilitate licenses through the existing mechanism. The EU pledged to work with member states to speed priority dual-use export licenses for Chinese buyers. Predictability and transparency in export controls topped the shared goals. The document contains no volume commitments, no fixed processing times and no guarantee against future tightening.

Šefčovič called the package a first step toward rebalancing. He highlighted tariff relief on roughly €4 billion of European goods, moderation in Chinese hybrid vehicle exports to the bloc, and the rare earths provision as relief for industries that build electric cars, wind turbines, defense systems and electronics. Analysts see the concession as real but narrow: a green channel speeds paperwork and does not rewrite the rules. Chinese authorities retain full discretion and can slow the flow or attach conditions when strategic calculations shift.

Dependence runs deep. The EU sources about 98 percent of its rare earth minerals and magnets from China. Processing capacity outside the country remains limited, and separation of heavy rare earths such as dysprosium and terbium sits almost entirely in Chinese hands. Those materials give magnets the heat resistance needed for high-end uses. Chinese rare earth exports through September 2026 stood 9.6 percent below the prior year. September alone saw 4,270 tons shipped, up modestly from a year earlier yet still well below peaks. Values have risen even as volumes fell because licensing has kept supply tight, and Crux Investor noted the resulting premium in prices outside China.

Europe is also trying to build alternatives. On the same day some of the Beijing talks concluded, the European Commission unveiled support for 46 strategic raw materials projects, with investment of around €21 billion covering lithium, gallium and rare earth initiatives. The Carester plant near Pau in southwestern France, when operational late this year, aims to produce significant volumes of dysprosium and terbium oxides. Industry Commissioner Stéphane Séjourné told The Guardian it could represent roughly 15 percent of global output for those oxides. A gallium facility in Greece is already running, and lithium operations in Finland are backed by the European Investment Bank. After Beijing restricted exports in 2011, Japan cut its reliance on Chinese rare earths from 90 percent to 60 percent through diversification, recycling and substitution. European leaders hope for similar progress and expect it to take years.

Peacock Tariff Consulting described the green channel as an administrative fast track rather than structural change. The November 10 expiration of the suspension on expanded controls remains a live risk: Beijing could extend the pause, reinstate parts selectively or let the tougher rules take effect. In July China added 14 European entities to its export control list, blocking shipments of dual-use items including rare earths without special permission. Names included German defense contractor Rheinmetall and Czech truck maker Tatra Trucks.

The diplomatic language still offers breathing room for auto plants, wind developers and defense programs that use guidance systems and other components. The underlying concentration remains. China mined only about 61 percent of global rare earths in recent years but controls 84 percent or more of separation and 90 percent plus of magnet production. Ministers plan to meet again in January and March 2027. European Commission leaders met in Brussels this week with China trade high on the agenda. The bloc's daily goods deficit with China hovers near £1 billion, which officials call unsustainable. After the Beijing announcement, the Stoxx 600 Automobiles & Parts Index gained 1.5 percent in one session.

Recycling and processing outside China are part of the longer response. Facilities in Estonia through the Neo Silmet operation have become important processors outside China, while France is expanding magnet recycling alongside its new separation capacity. These steps reduce reliance incrementally and do not replace primary supply quickly. Western alternative chains still face technical hurdles, environmental rules and capital demands. Separation plants need specialized chemistry and produce significant waste, and magnet manufacturing demands precision at nanoscale.

China's industrial guidance released in October codified a doctrine linking mineral control to technology leadership, tying raw materials to processing, research and market share. For now the truce holds, and rare earths are set to keep moving toward European ports under the expedited licensing track. He Yadong's words on Thursday offered reassurance with a condition: China will keep facilitating licenses for Europe, and it is asking the bloc to support its imports of certain dual-use products.