07/06/2025

BIZ & FINANCE SATURDAY | JUNE 7, 2025

14

Auto sector hit by China rare earth curbs

production for a week in May at its Chicago plant making the Explorer SUV because of shortages, according to Bloomberg. The firm told AFP that it does not comment on “supplier issues”. Indian scooter-maker Bajaj Auto recently warned the restrictions could impact its production in July. “The slow processing of (export) requests appears to be causing significant supply shortages,“ Cornelius Bahr from IW Economic Institute told AFP. “Statements (by German firms) indicating that stocks will only suffice through the end of June should certainly be taken seriously.” The electronics industry, another major consumer of rare earths, could also suffer. “Concern is visibly growing, many companies currently have resources

Manufacturing payrolls probably remained weak as factories grappled with duties on raw materials including motor vehicle parts. Construction employment could soon come under pressure from 50% tariffs on steel and aluminum. May was probably another month of moderate federal government job losses. While mass layoffs of public workers have grabbed headlines, a federal judge has blocked the firings. Reinstated workers who have been put on paid leave are counted as employed. The same applies to those who have accepted buyout offers. With the White House revoking the temporary legal status of hundreds of thousands of immigrants, fewer than 100,000 jobs per month would likely be needed to keep the jobless rate stable. The shrinking labour pool could push down the unemployment rate and boost wage growth, economists say. Average hourly earnings are forecast to have increased 0.3% after gaining 0.2% in April. In the 12 months through May, wages are estimated to have risen 3.7% after advancing 3.8% in April. – Reuters producers on cost, but also lack the necessary scale to supply its automotive sector”. Industry group CLEPA added that efforts undertaken in Europe to diversify supply sources “offer no short-term solutions and cannot address the acute risks currently facing supply chains”. Production halts, supply concerns The auto industry is already suffering globally. “With a deeply intertwined global supply chain, China’s export restrictions are already shutting down production in Europe’s supplier sector,“ said CLEPA secretary-general Benjamin Krieger. The group on Tuesday reported “significant disruptions” in Europe, where these restrictions “have led to the shutdown of several production lines and plants”. It warned that “further impacts (were) expected in the coming weeks as inventories deplete”. “The slow pace of customs formalities for shipments requiring a valid export licence poses a problem,“ Hildegard Muller, president of Germany’s automotive industry association VDA, told AFP. “If the situation does not evolve quickly, production delays, or even production losses, can no longer be ruled out.” While not citing “direct restrictions” for itself, Germany’s Mercedes-Benz said it was maintaining “close contact” with its suppliers, while Japan’s Suzuki Motor said Thursday it “had ceased production of certain models due to a component shortage”, including rare earths, the Nikkei daily reported. And US auto giant Ford had to halt

only for a few weeks or months,” said Wolfgang Weber, president of Germany’s electronics industry association ZVEI. Hope for a turnaround While uncertainty remains, talks between US President Donald Trump and Chinese counterpart Xi Jinping on Thursday seem to have paved the way for a potential easing by Beijing. “There should no longer be any questions respecting the complexity of (exporting) rare earth products,“ Trump wrote on his Truth Social platform after their phone call. A rapid resolution of the China-US row remains unlikely but reports indicate “an agreement was reached to overcome immediate obstacles, particularly con cerning critical minerals”, noted Wendy Cutler, vice-president of the Asia Society Policy Institute.

o Amid trade war with US, Beijing now requires export licences for key materials, including magnets for electric vehicles

WASHINGTON: US job growth likely slowed considerably in May as businesses struggled with headwinds from tariff uncertainty, but probably not enough for a cautious Federal Reserve to resume cutting interest rates anytime soon. The Labour Department’s closely watched employment report on Friday is also expected to show the unemployment rate holding steady at 4.2% for the third straight month and solid wage growth, which should keep the economy afloat for now. Nonetheless, the economy’s prospects are dimming and economists say President Donald Trump’s flip-flopping on tariffs has hampered businesses’ ability to plan ahead. They expected May to mark the start of slower job gains. Opposition to Trump’s tax-cut and spending bill from hardline conservative Republicans in the US Senate and billionaire Elon Musk added another layer of uncertainty for businesses. “The economy is caught in a rising temperature pressure cooker situation,“ said Brian Bethune, an economics professor at Boston TOKYO: The global auto industry has been rocked by China’s decision to restrict exports of rare earth magnets that are crucial to making vehicles. With a near monopoly on the output of rare earth elements, Beijing is using them as a key weapon in its trade war with Washington. Here we look at the implications for the sector. China’s restrictions China accounts for more than 60% of rare earth mining production and 92% of global refined output, according to the International Energy Agency, driven by generous state subsidies and lax environmental protections. As the trade war with the US has developed, Beijing has required Chinese companies since April to obtain a licence before exporting these materials – including rare earth magnets – to any country. While these rules were expected to be relaxed after a tariff deal in Geneva last month, industry stakeholders said they have not been eased at a sufficient pace. “Since early April, hundreds of export licence applications have been submitted to Chinese authorities, yet only approximately one-quarter appear to have been approved,“ the European Association of Automotive Suppliers (CLEPA) said Wednesday. “Procedures are opaque and inconsistent across provinces, with

College. “Tariff policies are changing daily, planning in that environment is clearly not conducive to any hiring.” Nonfarm payrolls likely increased by 130,000 jobs last month after rising 177,000 in April, a Reuters survey of economists showed. That would be below the three-month average of 155,000, but above the roughly 100,000 jobs per month that economists say are needed to keep up with growth in the working age population. Estimates ranged from 75,000 190,000 jobs added. Much of the job growth this year reflects worker hoarding by businesses. Tariff drag The anticipated moderation in job growth last month would be payback after front-loading of imported goods boosted payrolls in the transportation and warehousing industries in April. More jobs were likely created in healthcare, but a sharp reduction in tourist travel because of trade tensions and Trump’s often expressed desire to make Canada the 51st of the US and acquire Greenland, could hamper leisure and hospitality employment. some licenses denied on procedural grounds and others requiring disclosure of intellectual property sensitive information.” And US Treasury Secretary Scott Bessent this month said Beijing was “blocking certain products it had agreed to market as part of our agreement”. China, however, defended its “common international practice”. Few alternatives Rare earths are 17 metals used in a wide variety of everyday and high tech products, from light bulbs to guided missiles. Two of them – neodymium and dysprosium – are crucial to making powerful magnets for electric vehicles and wind turbines. These components play an essential role in “electric motors, sensors, power steering, and regenerative braking systems, among other advanced features in modern vehicles”, according to consultancy firm BMI. China’s restrictions highlight the world’s heavy dependency, with Europe importing 98% of its rare earth magnets from the country, BMI said. And, it notes, while the European Union has introduced regulations to boost its production of critical minerals, “rare earth processing operations in Europe not only struggle to compete with Chinese

China’s export curbs are already shutting down Europe’s supplier sector, with production lines and plants halting. – UNSPLASH PIX

Great Eastern proposes delisting with OCBC’s S$900 million offer

Slow US job growth anticipated in May, unemployment rate seen steady

SINGAPORE: Great Eastern is proposing to delist from the Singapore bourse by way of its largest shareholder Oversea Chinese Banking Corp offering S$900 million (RM2.96 billion) to buy the rest of the insurer it does not already own, according to joint statement and filings yesterday. Trading in Singapore-based Great Eastern’s shares was suspended on July 15, 2024, after its free float fell below 10% following an offer by OCBC to acquire an 11.56% stake at S$25.60 apiece in May 2024. OCBC, Singapore’s second-largest lender, had obtained acceptance from some shareholders and currently owns 93.72% of Great Eastern. Under the new proposal, it is offering S$30.15 a share for the 6.28% of the insurer’s stock that it does not own. The latest offer is 17.8% higher than last year’s offer and values Great Eastern at S$14.27 billion. Independent financial adviser EY has assessed the offer is fair and reasonable and OCBC does not intend to revise it, according to the statement. It is OCBC’s fourth attempt to fully acquire Great Eastern, following three bids since 2004. OCBC owns 93.72% of the insurer, but that stake still falls short of the

threshold needed to delist the company or launch a compulsory acquisition. Two companies controlled by Lee Thor Seng and his sons – members of the founding family behind OCBC – own nearly 2% of Great Eastern, making them the second-largest shareholders, according to the insurer’s annual report. Wong Hong Sun and Wong Hong Yen hold about 1%, while Palliser Capital, which has criticised the latest takeover bid as unfair to shareholders, owns a 0.27% stake, the report showed. Great Eastern proposed the delisting after assessing options available to resolve its shares trading suspension. The delisting offer is conditional upon at least 75% backing from minority shareholders. OCBC will not be able to vote. If delisting cannot be achieved, Great Eastern would seek shareholders’ approval on a second proposal to restore its free float by way of a one-for one bonus issue comprising new listed shares with voting rights, and new non-listed shares without voting rights. According to the statement, OCBC intends to vote in favour of the bonus issue if the delisting proposal is not approved. – Reuters