Supply chain concerns rise as China tightens rare-earth controls

China's tightening export controls on rare-earth materials have thrust our industry's long-standing concerns about supply chain resilience into the international spotlight, with major media reporting this week on the urgent need to address critical mineral dependencies.

The Financial Times reported on 14 October that Western companies are warning of "broken" supply chains and higher prices for chips, cars and weapons following Beijing's announcement of stricter rare-earth export restrictions taking effect 1 December. The FT highlighted how these new measures require foreign companies to obtain approval to export magnets containing even trace amounts of China-sourced rare-earth materials, whilst restricting the sharing of magnet-making expertise with foreigners.

Both the FT as well as Euronews – in coverage published the same day – referenced a statement by ASD according to which the latest export controls “underscore the urgent need for Europe to make its supply chains more resilient and reduce its critical minerals dependences”. 

ASD spokesperson Adrian Schmitz added that ASD is "closely monitoring the new measures and will assess their practical implications as further details emerge". 

Long-standing industry concerns

These media reports reflect concerns ASD has been raising for some time. In media coverage earlier this year, ASD said that "diversification is essential, and our industry is actively pursuing alternative sources, strengthening resilience, and reducing single-point dependencies wherever possible".

ASD warned then that "the evolving geopolitical landscape has significantly increased the exposure and fragility of critical supply chains," adding that "any disruption to these flows could severely impact defence readiness and industrial output, with potential consequences for European security and resilience".

Impact on European defence production

The scale of Europe's dependency is stark. According to Euronews, China alone supplies 31% of the EU's tungsten and 97% of its magnesium metal, whilst demand for rare earths is expected to rise sixfold by 2030. China dominates the production of rare earths, processing approximately 90% of the world's supply chain and over 90% of magnet manufacturing.

Daniel Fiott, professor at the Brussels Centre for Security, Diplomacy and Strategy, told Euronews that "expanded Chinese restrictions would hit Europe's defence industry hard, potentially delaying ammunition production and high-tech systems that rely on critical minerals," adding that "it comes at the worst possible time too, just as Europe seeks to rearm and scale up its defence base through greater investment".

Policy implications for Europe

The European Commission's Critical Raw Materials Act, passed earlier this year, sets ambitious 2030 targets: meeting 10% of demand through domestic extraction, 40% through processing, 25% through recycling, and limiting reliance on any single country to no more than 65% for each material. This is in line with ASD’s view that "whenever possible, building up domestic extraction, processing, and recycling capacities in the EU will be of utmost importance… "the EU should also support R&D into critical raw material substitution".