Chinese rare-earth magnet makers are quietly developing legal workarounds to Beijing’s tightened export rules, aiming to keep sales to Western customers moving even as China’s new licensing regime slows or blocks shipments of restricted materials, according to the Wall Street Journal.

After Beijing imposed export controls this spring—part of a broader clash with Washington—magnets containing even trace amounts of dysprosium or terbium began requiring licenses that can take “weeks or months” to obtain, if they come at all, traders say. The bottleneck has pushed Chinese manufacturers into a scramble to redesign their products.

The Journal writes that one approach is technical substitution. Companies including Yonjumag, Anhui Hanhai New Material, Zhaobao Magnet and X-Mag are promoting magnet grades that avoid restricted heavy rare earths by grinding materials to ultra-fine levels to boost heat tolerance. The magnets generally work at up to roughly 300 degrees Fahrenheit—good enough for appliances, though not always for cars or aircraft.

“As global supply chains for heavy rare earth elements tighten,” X-Mag wrote in October, developing magnet grades free of restricted materials “has become increasingly critical.”
Zhaobao said it was “continuously developing new high-performance magnet series free of restricted elements.”

Yonjumag circulated a brochure listing “counter measures,” including magnets without controlled heavy rare earths, and pledged to develop better grades by year-end.

Western buyers are purchasing the substitutes despite performance concerns. “Not being able to use [restricted heavy rare earths] does make the high-temperature performance slightly weaker, but for most customers, having a workable magnet is far better than having none,” marketer Dylan Kui wrote on LinkedIn. When another executive warned that sharing such data posed “regulatory risks,” Kui replied that he was providing standard technical information.

Companies are also resorting to structural workarounds: magnets are restricted, but motors are not. Chinese suppliers are shipping motors and other components with magnets already embedded, avoiding licensing requirements altogether.

Regulators, meanwhile, are closing gaps. Some magnet makers briefly shifted to holmium as a substitute for terbium and dysprosium—until China added holmium to its restricted list in October. Following a U.S.–China deal that same month, enforcement of the holmium limits was delayed by a year, temporarily reopening the loophole.

Firms insist they are staying within the law. Compliance officers are being hired, and Beijing has launched new crackdowns on mineral smuggling. Still, traders warn that China’s dominance gives it the ability to tighten exports again for geopolitical leverage.

Foreign customers, increasingly frustrated, are accelerating efforts to build supply chains outside China. As one buyer told a Chinese magnet-company employee: “When those sources are mature and viable, we’re done with you.”