Exclusive-Beijing has issued first rare earth magnet export permits, Volkswagen suppliers on the list

(Reuters) -China has issued export permits to at least four rare earth magnet producers including suppliers to Volkswagen, the German carmaker and industry sources said, the first granted since Beijing restricted shipments last month and a sign that the critical materials will continue to flow.  

Baotou Tianhe Magnetics, which makes the magnets used in electric and hybrid car motors, received a licence for Volkswagen in late April, three sources said. One of the sources added that the automaker had reached out to Beijing to help during the process.

"We remain in close contact with our suppliers and have received indications that a limited number of Volkswagen AG’s magnet suppliers have been granted export licenses by the Chinese government," Volkswagen said in response to questions from Reuters, declining to provide further detail.

Zhongke Sanhuan received at least one permit, two of the sources said. Baotou INST Magnetic and Earth-Panda Advanced Magnetic Material were also granted at least one permit, one of the sources added.

The sources declined to be named due to the sensitivity of the matter.

The four magnet producers and China's commerce ministry did not immediately respond to requests for comments.

Export licenses are granted for each customer and it is unclear whether all clients of the four firms have been cleared by Beijing. One of the sources said permits were only issued to suppliers for customers in Europe and Vietnam.

However, the permits were issued before the trade war truce agreed with Washington on Monday, which industry sources said is likely to make it easier for U.S. customers to win approvals.

Beijing issued the permits less than a month after it imposed restrictions on seven rare earth elements and related materials as part of a response to U.S. President Donald Trump's earlier tariffs, bucking industry expectations of a long wait.

    The sources said the permits were the first to be issued since Beijing imposed its curbs.

China dominates the processing of the 17 rare earth elements used across clean energy, defence and automaking and companies have few, if any, alternative suppliers.

That dependence is demonstrated by Volkswagen's intervention as well as lobbying from other big Western users. Elon Musk said last month Tesla was in talks with Beijing over licenses for its Optimus robots.

(Reporting by Beijing newsroom and Christoph Steitz in FrankfurtEditing by Lewis Jackson and Tony Munroe, Kirsten Donovan)