Berlin expresses worry over potential disruptions in arms supply from China.
Germany Faces Critical Raw Material Shortages Due to Tightened Chinese Export Regulations
Germany is grappling with potential disruptions in supplies of essential raw materials for arms production, as China tightens its export controls on rare earth metals. The German government is expressing concern over delays and the risk of operational halts in defense companies due to China's tightened export regulations on rare earth metals, which are crucial for weapons manufacturing.
China, which controls more than 90% of the global rare earth processing capacity, has imposed export controls on seven key rare earth elements and related magnets, causing substantial supply delays and price surges. This has severely strained production chains not only in arms manufacturing but also in automotive and technology sectors.
The shortages include potential production halts reported in automotive and renewable sectors, hinting similar risks for defense manufacturing lines. Small and medium-sized enterprises in Germany often have raw materials for only a few weeks, and companies are increasingly complaining about these potential disruptions.
The European Commission can pass information about cases affecting companies to the Chinese government to exert diplomatic pressure. However, diversification strategies are urgently needed but remain challenging. The German Ministry of Economics and industry urges seeking support from the European Commission for diplomatic pressure to ease restrictions.
Alternative global mining and processing capacities outside China are currently very limited, making immediate supply chain diversification difficult. European vulnerability stems from a lack of proactive diversification seen in countries like Japan, who reduced reliance after similar export restrictions in 2010, whereas Europe maintained greater dependence.
Strategic investments in rare earth mining, processing capabilities in Europe or allied countries, and recycling initiatives are recognized long-term priorities, though these require substantial time and capital to develop. Without significant diversification or diplomatic success helping to ease controls, further disruptions are likely.
The suspension of exports of rare earth metals and magnets by China threatens supplies of materials crucial for the production of fighter jets and electric vehicles. Although some licenses to Europe for the export of rare earth metals have been approved, their number and speed are insufficient to meet demand, causing concern in the industry.
Sources:
- Financial Times, 2021
- The New York Times, 2021
- Bild, 2021
- Gassabeh, 2021
- Federal Association of German Security and Defense Industry, 2021
- The industry and finance sectors are closely monitoring the situation, as potential disruptions in supplies of rare earth metals could impact not only defense manufacturing but also the automotive and technology sectors.
- Politics and general news are abuzz with discussions about the need for diversification strategies to reduce Europe's dependency on China for rare earth metals, following the tightened export regulations by China on these crucial materials.
