China tightens grip on critical minerals, disrupting Western defence supply chains

In a strategic shift with sweeping implications for global defence manufacturing, China has escalated restrictions on the export of critical minerals, disrupting supply chains across the Western world and exposing the deep reliance of US and allied militaries on Chinese raw materials. The materials in question, including rare earth elements, gallium, germanium, and antimony, are essential to the production of advanced weapons systems, from infrared missile sensors to radar arrays and fighter jet engines. China not only mines a majority of the world’s rare earths, but it also controls as much as 90 per cent of global refining capacity, turning it into a chokepoint for the global defence industry.

Chokehold on supply disrupts production

Earlier this year, Beijing imposed tighter export controls on several categories of rare earths and other critical minerals. While some concessions were made after the US agreed to limited trade compromises in June, China has maintained strict limits on shipments intended for military applications. The impact has been immediate. One US-based drone parts supplier, ePropelled, was forced to delay shipments by up to two months after its Chinese suppliers demanded photos, schematics, and end-user details before releasing magnets made from rare earths. The company refused, prompting the suspension of deliveries.

Across the defence sector, prices for materials such as samarium, used in high-temperature magnets for jet engines, have skyrocketed, in one reported case increasing by 60 times. Suppliers now warn of rising costs and looming production halts unless access to critical minerals is restored or alternative sources are secured. Leonardo DRS, a major US defence firm, has already hit critical levels on its stockpile of germanium, vital for infrared targeting sensors, with CEO Bill Lynn warning that material flow must improve in the second half of 2025 to avoid supply disruptions.

Strategic weakness exposed

The growing crisis has highlighted a key vulnerability: more than 80,000 parts used in US Department of Defense weapons systems rely on minerals currently under Chinese export control, according to defence analytics firm Govini. Nearly all those supply chains involve at least one Chinese vendor. Some companies have responded by racing to build stockpiles, but many, especially smaller drone manufacturers and startups, lack the resources or foresight to accumulate months’ worth of reserves. Even those that do stockpile face problems sourcing materials like antimony or dysprosium, which have few viable alternatives outside China.

The Pentagon has attempted to address the crisis with targeted investments. In July, it committed $400 million for a 15 per cent stake in MP Materials, the only US-based rare earth mining and processing company. In earlier grants, it also funded expansion of germanium and antimony production by Canadian and American firms. But officials acknowledge that reshaping the supply chain will take years.

A domestic push, but time is short

Amid intensifying pressure, US companies are moving aggressively to build up domestic rare earth capacity. USA Rare Earth, a Texas-based firm launched in 2019, has seen a surge of investor interest since China’s latest round of export curbs. The firm raised $170 million for its magnet production line and is seeking another $300 million to expand operations. Still, the gap is large. China continues to control 60 per cent of global rare earth mining and 90 per cent of refining. In 2024, China produced 750 out of the 760 tonnes of gallium used worldwide. The US produced none.

While MP Materials is ramping up magnet production, much of its raw material still goes to China for processing, a bottleneck the Pentagon is now paying to eliminate. USA Rare Earth’s mine in Texas contains reserves of 15 out of 17 rare earth elements, and its refining technology is designed to be more sustainable than past US operations, which were hindered by environmental concerns.

Washington is also trying to diversify through partnerships. Ukraine has emerged as a potential supplier, but developing its mining infrastructure amid ongoing war could take decades. In the meantime, defence companies are invoking emergency powers under the Defense Production Act and seeking long-term deals with rare earth producers in allied countries. DARPA and other agencies are working on predictive models to identify future bottlenecks, while firms like Phoenix Tailings in Massachusetts aim to ramp up domestic metal recycling and processing. Still, the clock is ticking. US law now requires defence contractors to eliminate Chinese-sourced rare earth magnets by 2027. Without new, stable sources, some firms will hit a cliff edge in less than two years.

(With inputs from agencies)