“China is banning the export of rare earth elements for military purposes. The German Federal Government's top raw materials representative warns: Not everyone has yet grasped the full implications of this blockade.
A clear stance against Putin: This is the message with which German Chancellor Friedrich Merz (CDU) is traveling to Brussels on Thursday for the EU summit of heads of state and government. In addition to military and financial support for Ukraine, this course also includes Germany significantly increasing its own defense spending.
Next year, more than 100 billion euros will flow into this sector for the first time, and the amount is expected to grow to more than 150 billion euros by 2029. Armaments companies can expect a flood of orders.
But will they actually be able to produce tanks, drones, and other military equipment? Following the latest announcement from the Chinese Ministry of Commerce, this is no longer certain. China is tightening the rules for the export of rare earth elements from China. These raw materials are used in virtually all technical products, from household appliances and electric cars to tanks and fighter jets. In the future, not only will exports from China require a permit – even if, for example, a German company exports a product containing Chinese rare earth elements to France, it will need the green light from Beijing.
“This alone is a huge problem for the economy, but the announcement contains another detail that is causing great concern to the head of the German Raw Materials Agency (DERA): "China is completely prohibiting the export of rare earth elements for military purposes," says Peter Buchholz. "This is a challenge whose full implications are not yet clear to everyone." The new rules will take effect from the beginning of December.
As head of the DERA, Buchholz is, in a sense, the federal government's chief raw materials officer. The raw materials agency was founded in 2010, when China imposed export restrictions once before, causing considerable unrest in politics and business. The agency is based at the Federal Institute for Geosciences and Natural Resources, which belongs to the portfolio of the Federal Ministry for Economic Affairs.
Buchholz assesses the current situation as similarly serious to the one 15 years ago. "The defense sector faces a dilemma," he says. "Without rare earth elements or high-performance magnets made from rare earth elements, hardly anything works there." "Important supply chains are thus being slowed down." Neither Buchholz nor the German government are willing to comment on what this ultimately means, or whether and when the arms industry will run out of rare earth elements. "Of course," they are exchanging information with the industry and with partners in the EU and NATO, a spokeswoman for Defense Minister Boris Pistorius (SPD) writes. However, these discussions are confidential. The general principle is: "The management of domestic and foreign supply chains, as well as the assessment of raw material supply and supply chain security, is the responsibility of the main contractors for the items to be procured."
"As a responsible major power," the Chinese introduced the controls "to better safeguard world peace and regional stability": This is how the Chinese government justifies its move. To Western ears, this may sound like mockery, given that China is actively supporting Russia. The communist leadership also accuses foreign companies of having circumvented previous export regulations. The companies had exported rare earth elements from China and "passed them on or made them available for direct or indirect use in sensitive areas such as military operations," a spokesman for the Ministry of Commerce criticized.
The background to all this is the trade war between China and the USA, in which both countries invoke national security to justify their measures. Both also accuse each other of overstretching this concept. While the United States is cutting China off from advanced semiconductors, the People's Republic is controlling access to critical raw materials. As early as April, China had introduced export controls for some medium and heavy rare earth elements, but did not explicitly state that exports for military purposes would be completely suspended.
Peter Buchholz, head of the DERA (German Raw Materials Agency), describes Germany's dependence on rare earth elements from China as "extremely high." "The so-called light rare earth elements are technically easier to extract, and there are now alternative sources of supply, for example in the USA, Malaysia, or Estonia," he explains. "However, with the high-performance magnets made from heavy rare earth elements, the dependence on China is almost 100 percent." Japan reacted to the restrictions after 2010 by participating in mining projects in Australia and processing plants in Malaysia. "This allowed them to reduce their dependence, at least for light rare earth elements." The Americans took a similar approach.
Buchholz is convinced that Europe can also reduce its dependence. "There is enough potential to open mines around the world." The bottleneck is the separation of rare earth elements. Europeans need to seek cooperation with countries like Australia, Canada, and Brazil.
"We certainly won't get out of this dependence in just a few months," he says, "but in the next five years it would be somewhat realistic."
The prerequisite is that "massive" capital is invested in this area. However, what complicates matters is that "China also prohibits the export of technology and software for the separation of rare earth elements. Chinese scientists who are knowledgeable in this field are not allowed to work abroad."
The head of DERA makes no secret of the fact that he considers the emerging supply shortages to be at least partly self-inflicted. "German industry could have learned from the experiences of 2010 to 2012." But it has not sufficiently diversified its supply chains. Mining rare earth elements outside of China is associated with significantly higher prices. "My impression so far is that the industry is not willing to pay this price." Companies are speculating that they will continue to be able to buy cheaply in China – and that the supply bottlenecks will only last a little longer.
With the raw materials fund already established during the previous coalition government, politicians want to encourage businesses to develop new sources of supply. One billion euros are available in this fund for equity investments through the state-owned development bank KfW, with a maximum of 150 million euros per company. The first grants are expected to be awarded by the end of the year. However, in light of the current budget constraints, there is no longer any talk of increasing the fund, as announced in the coalition agreement. Some industry representatives are currently looking enviously at the USA, where the Department of Defense is purchasing critical raw materials itself for one billion dollars. "Currently, the pressure is high, and there are calls from all sides for more state stockpiling," says Buchholz. "But will companies actually make use of it? Or will they try to continue buying from China when prices fall?" The head of DERA leaves the answer open. One can guess what he suspects.” [1]
1. Keine Rohstoffe mehr für Rüstung. Frankfurter Allgemeine Zeitung; Frankfurt. 20 Oct 2025: 15. Von Julia Löhr, Berlin, und Gustav Theile, Shanghai
Komentarų nėra:
Rašyti komentarą