Multiple industry insiders revealed that suppliers to U.S. aerospace and semiconductor companies are facing increasing pressure from rare earth shortages, and at least two of them have begun to refuse some customer orders. This is just weeks before U.S. President Trump plans to go to Beijing to hold a summit with Chinese President Xi Jinping.
The current tensions focus on "niche elements" in the rare earth family such as yttrium and scandium. Although these elements are used in very small amounts in defense technology, aerospace industry and semiconductor manufacturing, they play an irreplaceable key role, and their production is almost entirely dependent on China.
Although Beijing has allowed a large amount of rare earth exports to resume since China implemented relevant export restrictions in April last year, customs data shows that the flow of such materials to the United States is still very sparse and has not picked up significantly due to the easing of Sino-US relations in October last year.
A trade "truce" based on China's commitment to suspend export restrictions on key minerals is expected to be one of the important topics when Trump and Xi Jinping meet in Beijing in March.
What worries the aerospace industry most is the tight supply of yttrium. Yttrium is a key component in high-temperature protective coatings that prevent engines and turbines from "melting" at high temperatures. Once the coating is not applied regularly, the engine will not be able to serve normally.
Since Reuters first reported the tight supply of yttrium in November last year, the price of yttrium has risen by about 60%, a surge of about 69 times from a year ago, and some coating manufacturers have begun to ration raw materials.
Executives of two North American companies that purchase yttrium for coating production said they had to temporarily suspend production because they could not obtain enough raw materials. One of the companies also began to reject orders from smaller and overseas customers, and prioritized limited supply to large customers, including some engine manufacturers.
Another company in the coating supply chain was reported by people familiar with the matter to have completely exhausted its inventory and suspended the sale of all yttrium oxide-containing products.
A U.S. government official said that although shortages of yttrium and scandium have not yet directly affected the production of jet engines and chips, some U.S. manufacturers have experienced "shortages" of specific rare earth raw materials from China.
Data show that in the eight months after China implemented export controls in April last year, China exported only 17 tons of yttrium products to the United States, while the related export volume in the previous eight months was 333 tons, a very significant decrease.
A White House official said the Trump administration is committed to ensuring that all U.S. companies have access to critical mineral supplies, "This includes negotiating with China and monitoring China's implementation of the agreement between President Trump and President Xi Jinping, while developing alternative supply chains when necessary."
Kevin Michaels, managing director of AeroDynamic Advisory, an aerospace supply chain consulting firm, said that although the current tight supply of yttrium has not yet hit engine assembly, manufacturers are still highly vigilant. “This has become a project that requires key monitoring and is also a concrete example of China demonstrating its influence in the rare earth field,” he said.
Prior to this, engine manufacturers were already under delivery pressure as Boeing and Airbus ramped up production and airlines increased demand for spare parts. U.S. engine manufacturers GE Aerospace, RTX's Pratt & Whitney and Honeywell all declined to comment on related issues.
In the semiconductor field, the shortage of scandium is also worrying. Dylan Patel, founder and CEO of research organization SemiAnalysis, pointed out that U.S. chip manufacturers' stocks of scandium are declining, which may jeopardize the production of a new generation of 5G chips.
Global scandium production is only a few dozen tons per year, but it plays a key role in fuel cells, special aluminum alloys, and advanced chip processes and packaging.
Patel said that major U.S. semiconductor companies rely on scandium to prepare certain chip components, and these components are "used in almost every 5G smartphone and base station."
Two industry sources said that U.S. chip manufacturers have frequently encountered delays in applying for new scandium export licenses from China in recent months, and some companies have asked Washington for help.
Another U.S. official said that many companies previously purchased scandium indirectly through third-country suppliers, but China requires license applicants to declare end users, which has restricted the bypass route. "Our judgment is that China is exerting targeted pressure on the semiconductor industry." The official said.
The Semiconductor Industry Association declined to comment.
Patel pointed out that "the current domestic scandium production in the United States is zero, and there is no alternative source that has been put into operation outside China." The existing inventory may be calculated in "months" rather than "years".