German businesses are increasingly facing threats due to the trade dispute between China and the United States, particularly concerning export restrictions on raw materials. According to Stefan Steinicke, a raw materials expert at the Federation of German Industries (BDI), Germany is heading towards a “metal crisis” extending beyond the critical shortage of rare earths. He stated in an interview with “Spiegel” that “exploding demand meets structural supply deficits” with no immediate improvement anticipated. Steinicke believes the Chinese government is leveraging Europe’s dependence on rare earths to pressure concessions in other areas.
Rare earths are essential for manufacturing magnets and components used in electric vehicles, wind turbines and defense equipment. Germany and Europe are heavily reliant on China to meet this demand, making recent export controls particularly concerning. Steinicke noted that China is restricting exports to a degree that hinders other nations from building strategic reserves. Simultaneously, Beijing retains the ability to flood global markets with these materials, potentially driving prices down. This creates significant investment risks for Western companies pursuing domestic mining and processing capabilities, which Steinicke argues will “not be possible without state aid.
Despite existing government support, Germany is making minimal progress in securing raw material supplies. Approximately one year ago, the German government allocated one billion euros for a raw materials fund. However, Steinicke criticizes that “not a single project has been selected and no additional ton of raw materials has been promoted” with these funds.
Federal Economics Minister Katherina Reiche (CDU) acknowledged the scarcity of rare earths, stating last week that production lines are sometimes coming to a standstill. However, the Ministry declined to disclose the number or names of affected companies. A spokesperson for the government explained that they are utilizing “all available channels, in coordination with the EU Commission, to underscore the seriousness of the situation for German companies”.