EL7.AI
StocksMedium•24 October 2026•
5 min read

GM Contract Cancellation Threatens 90% of VAC’s U.S. Magnet Plant Output

Key Facts

1GM was scheduled to buy 90% of output from VAC’s U.S. magnet plant.
2China’s yttrium oxide exports to Japan fell to 4,000 kilograms in September 2026 from 51,000 kilograms a year earlier.
3e-VAC began arbitration on 7 July 2026 after receiving notice of contract termination on 1 July.
4The roughly $1.9 billion price of Energy Fuels’ acquisition of VAC could be adjusted depending on the outcome of the arbitration.

General Motors canceled a long-term supply agreement for electric-vehicle magnets with e-VAC Magnetics, the U.S. unit of Germany’s VAC, Reuters reported, citing a source familiar with the matter who confirmed that GM was the customer that terminated the agreement. The cancellation puts pressure on VAC’s U.S. magnet plant, 90% of whose capacity was intended for the company. The dispute began in April 2026, according to a disclosure filed by Ara VAC IE Aggregator with the U.S. Securities and Exchange Commission. The customer formally notified e-VAC that it was terminating the commercial supply agreement on 1 July 2026. Six days later, e-VAC began arbitration proceedings, seeking enforcement of its contractual rights and damages owed.

GM disclosed that a supplier of a component used in electric traction motors had begun arbitration proceedings seeking damages after the company terminated a strategic supply agreement. GM did not name the supplier in its disclosure, while the Reuters report identified the counterparty as e-VAC Magnetics. The differing levels of detail in the two disclosures show that the company confirmed the dispute without revealing the supplier’s identity or the amount being claimed. GM’s disclosure does not state the amount of damages sought. The dispute now centers on the parties’ rights under the supply agreement that ended in July.

VAC opened its U.S. plant late last year at a cost of $500 million, with annual capacity of just under 2,000 metric tons of magnets. The plan was to sell 90% of production to GM, Reuters reported. Energy Fuels says its Sumter, South Carolina, facility is designed to produce 2,000 tons a year, with the potential to raise capacity to 12,000 tons a year. Ending the agreement means the plant must rearrange most of its planned sales or attract replacement buyers. But available sources do not say whether VAC has found other customers or how it will redistribute production. The episode highlights the difficulty of securing commercial demand for a new U.S. plant in a market dominated by China.

China produces about 90% of the world’s permanent magnets, according to Reuters, making the development of Western manufacturing capacity part of efforts to reduce dependence on Chinese suppliers. China’s exports of rare-earth magnets fell 35% month over month in May 2026, to their lowest level for that month since May of the previous year, Reuters reported. China’s Ministry of Commerce said export controls were not a ban and that licenses would be granted for eligible applications. In June, Energy Fuels agreed to acquire VAC for an implied value of about $1.9 billion. The purchase price could change depending on the outcome of the arbitration, Reuters reported, linking resolution of the dispute to the deal’s final value.

Energy Fuels said the deal combines its rare-earth mining, processing and separation assets with VAC’s magnet-making expertise, with the aim of building a supply chain from mine to finished product. The company had expected to complete the acquisition in the first quarter of 2027, subject to customary closing conditions, including regulatory approvals. Sources do not give a date for resolving the arbitration or say whether it will affect the deal’s completion timeline. The outcome of the dispute remains a potential factor in determining the acquisition price, while VAC’s plant must contend with the loss of the customer for whom most of its output was earmarked. No details have been announced about a schedule for selling available production capacity to other customers.

Separately, an official at Japan’s Ministry of Economy, Trade and Industry said exports of yttrium to Japan and worldwide had stopped, causing a supply-demand imbalance and pushing up prices. Supplies to Japan had fallen and some shipments had been delayed, the official added, according to a Japan Times report citing Agence France-Presse and Kyodo. China’s yttrium oxide exports to Japan totaled 4,000 kilograms in September 2026, compared with 51,000 kilograms in the same month a year earlier. Yttrium is used in consumer electronics, LED lamps, aircraft engines, semiconductor manufacturing equipment and other industrial products. The Financial Times attributed an estimate to Japanese officials that the country’s inventories could run out within months, but the ministry official did not describe it as a formal warning with a specific timeline.

GM shares closed at $75.92 on 23 October 2026, according to EL7 data. In the rare-earth metals market, EL7 published a story on 4 September about a rally in sector stocks after China restricted shipments bound for the United States. Available facts do not include GM’s share price movement after the contract cancellation was announced, so the closing price cannot be directly linked to the news. Sources also do not establish a connection between the GM dispute and Japan’s yttrium crisis: the former concerns a supply contract for electric-vehicle magnets, while the latter concerns a decline in yttrium oxide shipments. The Bank of Japan’s next monetary policy meeting is scheduled for 29 and 30 October 2026. The decision and outlook report are due on 30 October, with no advance announcement time specified.