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 rare earth element bottleneck. 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 earth elements are critical for the production of magnets and components used in electric vehicles, wind turbines and defense equipment. Germany and Europe rely heavily on China to meet this demand, making recent export controls particularly concerning. Steinicke noted that China is restricting exports to the extent that other nations struggle to build strategic reserves. Simultaneously, Beijing retains the ability to flood global markets with these resources, potentially driving prices down. This creates significant risks for Western companies investing in mining and processing, making such investments unlikely to proceed without government support, according to the BDI representative.
Despite existing government funding, Germany is making little progress in securing its raw material supply. Approximately one year ago, the German government allocated one billion euros to 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 Economic Minister Katherina Reiche (CDU) acknowledged the scarcity of rare earth elements, stating last week that production lines are occasionally 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 urgency of the situation for German companies”.
