A German industry has expressed alarm over the restrictions imposed by China on the export of rare earths. According to Stefan Steinicke, a resource expert at the Federal Association of German Industry (BDI), the temporary de facto export stop has led to a backlog in the approval of new export licenses, which is still affecting supply chains today.
German industry and trade chambers have reported that some German companies are experiencing delayed deliveries of rare earths due to the Chinese export restrictions. “We can report that German companies are experiencing delayed deliveries of rare earths due to the Chinese export restrictions” said the German Industry and Trade Chamber (DIHK).
The DIHK warned that the German economy is at risk of being torn between geopolitical fronts, particularly in the context of US tariffs. The reliable supply of raw materials is of existential importance for the German industrial location.
Steinicke warned of the consequences of the current regulations, which require companies to provide sensitive business data. The Chinese Trade Ministry would gain granular insights into global supply chains, Steinicke said, adding that this knowledge could be strategically used in a conflict scenario.
The Institute of the German Economy in Cologne (IW) also concluded in an analysis that Europe is still completely dependent on the import of rare earths from China and therefore remains particularly vulnerable. Some companies may be unable to react to the risks, according to IW economist Hubertus Bardt in his paper.
To prevent political blackmail, Bardt suggested that at least a de facto pre-purchase right should be granted in the event of a conflict, in return for investments in concrete raw material projects, processing and recycling.
The half of the reserves of rare earths lies outside of China, for example in Brazil, India, or Australia. BDI and DIHK are pursuing a similar approach, with the DIHK suggesting the acceleration of trade agreements as a way to reduce dependencies.
BDI resource expert Steinicke called for a “triple approach”: diversifying imports, strengthening the domestic raw materials industry and increasing recycling and circular economy. The greatest lever to reduce import dependence, Steinicke said, is to build further processing facilities in Germany. The EU should also invest in a European magnet production. Additionally, Steinicke advocated for a significant increase in the raw materials fund, stating that reducing dependence on raw materials should be worth more than one billion euros.
A spokesperson for the European Commission told the Funke newspapers that the measures are currently being analyzed and companies are right to fear that it may take some time to obtain new licenses. The decision by China underscores the need for the EU to diversify its supply chains.