General Motors has cancelled its long-term supply deal with Vacuumschmelze's South Carolina magnet plant, and the two sides are in arbitration. The move spotlights the challenges Western firms face in building domestic rare-earths output and cutting their reliance on China.
General Motors, the biggest customer of a US factory making rare earth magnets for electric vehicles, cancelled its long-term supply deal with the manufacturer, according to Reuters. Regulatory documents and a person with knowledge of the situation show the two sides are now in arbitration.
Termination surfaces in SEC filings
Germany's Vacuumschmelze, or VAC, signed a long-term deal in 2023 with GM to supply permanent magnets for its electric vehicles from a new plant in South Carolina. Energy Fuels, which agreed in June to pay $1.9 billion to acquire VAC, said in SEC documents that a customer of the plant terminated its supply agreement on July 1. VAC launched arbitration several days later.
Energy Fuels did not name the customer. However, GM this week reported in an SEC filing that a supplier initiated arbitration after the cancellation, and Reuters quotes the filing: "initiated an arbitration against us seeking damages after we terminated a strategic sourcing agreement." GM did not say why it cancelled, and the person familiar with the matter confirmed GM was the customer.
A plant built around one customer
VAC launched its $500-million US magnet plant late last year with a capacity of just under 2,000 metric tons a year. VAC CEO Erik Eschen told Reuters in September last year that 90% was set to be sold to GM, with the remainder supplying the US government.
GM has been pulling back on EV sales after the Trump administration withdrew incentives and tax breaks meant to benefit the industry. In January, GM took a $6 billion charge to unwind some EV investments.
Energy Fuels flags possible price adjustment
The dispute first arose in April 2026, according to the SEC documents, and Energy Fuels said it was aware of it while negotiating the VAC acquisition. Energy Fuels told Reuters there may be potential adjustments to the purchase price of VAC depending on the arbitration's outcome. GM and Energy Fuels declined to comment because the arbitration is confidential.
The case spotlights the challenges Western firms face in cutting reliance on China, which produces about 90% of global permanent magnets.
Source: Investing.com (Reuters)
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