Risks of Raw Material Shortages from China Worry Industry and Experts
Industrial associations, politicians and China experts are sounding the alarm over the acute shortage of raw materials from the People’s Republic of China. The temporary export restrictions on so-called heavy rare earths and magnets from China are “alarming for the German industry” said Wolfgang Niedermark, CEO of the Federation of German Industries (BDI), in an interview with the Spiegel. If Beijing fails to take action, it could lead to “sector-wide problems” such as production halts.
“Nations are facing a metal crisis, similar to the energy crisis of 2022, when Russia stopped gas supplies” warned Niedermark. The automotive, machinery and energy sectors, as well as defense and technology industries, are particularly vulnerable, as they rely heavily on imports. “In the case of electric motors, robotics, or drones, the dependence on imports is not only high but system-critical” he emphasized.
China reportedly supplies 99% of the world’s demand for heavy rare earths and 93% of the world’s demand for magnets. These magnets are used in applications such as electric vehicles, fuel pumps and motorized window lifts. In April, the Chinese government introduced export controls on rare earths in response to US tariffs.
German companies are already feeling the impact, with export licenses requiring renewed approval, leading to delays of several months. ZF, an auto parts supplier, has already seen the effects on some of its suppliers, stating that the licensing process must be accelerated to avoid short-term production halts.
Experts predict that the stockpiles of German companies will soon dwindle. “Hardly any company in Germany can have more than two months’ worth of rare earths or magnets in stock” said Jost Wübbeke, co-founder of the consulting firm Sinolytics. The Green Party’s Franziska Brantner is calling for swift action from the German government, suggesting that the state could invest in projects related to the extraction, processing, or recycling of rare earths. A proposed fund of one billion euros is waiting to be utilized. “It’s the last wake-up call to invest” Brantner said.