Intensifying constraints in the supply of rare earths pose a potential threat to German manufacturing sectors
Europe and Germany are heavily dependent on China for rare earths and critical intermediate products like magnets, which are essential for future technologies like e-mobility, wind turbines, and high-tech electronics. This dependence poses significant risks to their technological sovereignty and access to future markets.
China's dominance in the entire rare earth value chain—from extraction to processing and refining—gives it substantial leverage to control prices, supply availability, and geopolitical influence over European industries, particularly in strategic sectors such as automotive manufacturing, electric vehicles (EVs), advanced electronics, and defense systems.
Potential Risks of Dependence
The dependence on China creates several potential risks for Europe and Germany.
Supply Chain Vulnerability
China controls over 90% of global rare earth processing capacity, and 98% of the EU’s imports related to the magnet value chain come from China. This makes Europe extremely exposed to supply shocks if Beijing imposes export restrictions, as it did in 2024 and 2025.
Technological Sovereignty Erosion
Europe's reliance on China limits its ability to independently develop and sustain its clean technology industries, such as EVs, wind turbines, and electronic components, which rely heavily on rare earth permanent magnets.
Geopolitical Leverage
China has used export controls as a geopolitical tool, leveraging rare earth exports to gain negotiating power and exert pressure on Western economies, including Germany, the EU, and the US.
Market Access Risks
As the global transition to clean technologies accelerates, restricted access to critical materials could slow European innovation and undermine competitiveness in emerging future markets like EVs and green tech.
Solutions and Strategic Responses
Addressing these challenges requires a combined strategy of supply diversification, boosting domestic production and processing, recycling, innovation, and proactive EU-level policy frameworks.
Diversification of Supply Sources
Europe is actively seeking to reduce reliance on China by pursuing supply from other countries such as Brazil, Canada, and Australia, while developing its own mining projects in Norway and Sweden, though these are a decade away from full operation.
Recycling and Circular Economy
Recycling rare earths from end-of-life products (like electric motors) is a promising short-term strategy, potentially supplying up to 30% of Europe's needs, helping to ease import dependency.
Building Processing Capacity in Europe
Europe currently has only two rare earth processing facilities (one in Estonia and one in France). Increasing investment in processing capabilities outside China is critical to forming an independent value chain.
EU Initiatives
The EU’s Critical Raw Materials Act, effective since 2024, sets ambitious targets to reduce import dependence through increased extraction, processing, and recycling within Europe by 2030.
Strategic Stockpiling and Diplomacy
Engaging diplomatically with China to ensure stable supply chains while building strategic reserves and stockpiles of critical materials can buffer short-term disruptions.
Technological Innovation and Substitution
Developing alternative technologies that reduce rare earth use or substitute with other materials can mitigate risks, though this requires sustained research and investment.
Impact on Technological Sovereignty and Future Markets
This dependence threatens Europe’s technological sovereignty by making its clean energy transition and industrial policies contingent upon China's export policies and market behavior. Without diversified supply chains and increased domestic capacity, European industries face potential production halts, increased costs, and diminished global competitiveness in critical future markets such as electric vehicles and renewable energy technologies.
In summary, Europe's and Germany's heavy reliance on Chinese rare earth supply chains creates vulnerabilities that affect technological autonomy and market access. Addressing these challenges will require a combined strategy of supply diversification, boosting domestic production and processing, recycling, innovation, and proactive EU-level policy frameworks.
- The reliance on China for rare earths and critical intermediate products like magnets, essential for future technologies such as e-mobility, wind turbines, and high-tech electronics, could hinder Europe's and Germany's ability to independently develop and sustain these clean technology industries, eroding their technological sovereignty.
- The dependence on China for rare earths could limit Europe's and Germany's access to future markets, particularly in emerging areas like electric vehicles and green tech, as restricted access to critical materials could slow European innovation and undermine competitiveness.
