(Dec 2): As Europe embarks on a historic rearming effort, its defence companies are scrambling for a vital component in high-tech weapons: rare earth minerals, which more nimble US rivals are scooping up.
Despite a one-year rare earths trade war truce between the US and China, Beijing maintains tight controls on supplies and prohibits sales to companies that produce weapons.
That has made stockpiles already outside China even more precious — European rare earths supplies may begin running dry in months by some estimates — and incentivised defence companies to be quick and ruthless in securing them.
So far, US companies have been much better at navigating that landscape than their European counterparts.
“If we look at how long it takes us on average to sell, say, a tonne of terbium to a European partner, we’re talking about three to four weeks; with the Americans it’s more like three to four days,” said Tim Borgschulte, chief financial officer at Berlin-based critical raw materials trader Noble Elements.
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Rare earths are necessary for defence components such as advanced sensors and precision motors, used in everything from frigates to fighter jets to military drones. Component makers are already feeling the squeeze.
Dwindling stockpiles in Europe may leave just months before production is affected, according to a person familiar with the matter at a European defence company.
Jan Giese, senior manager for rare earth elements at Frankfurt-based metals trading company Tradium GmbH, said US defence companies are using their heft and financial firepower to secure supplies and funnel them as far upstream as they can to component suppliers.
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This can mean less scrutiny of the transaction and obscures a portion of the supply chain — a hedge against harsher restrictions from China. It also ensures component suppliers have what they need.
By contrast, European defence companies are trying to buy rare earths directly, without coordinating with suppliers, and with little government support. Borgschulte said his defence customers often don’t know the quantity and quality of rare earths they need and when they need them, creating last-second purchases that fall short of requirements.
US companies are more creative with how they use supply chain knowledge, Giese said.
“The Americans have a sense of urgency, a financial might and people with both mandates and expertise making decisions, all of which are things that Europe is sorely lacking,” he said.
A person familiar with the matter at a German defence company said their US counterparts were much more aggressive in the European market. The Americans’ speed at tracking down and buying rare earths has left the company with just small amounts available at high prices, the person said.
Chinese rare earths sold before April 2025, when defence export restrictions went into force, are snapped up quickly. It is difficult to quantify the amount of rare earth elements in circulation because of high turnover rates.
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There are no EU restrictions on where rare earths in Europe can be sold or shipped, opening the door to outflow to other continents.
The US has prioritised becoming more independent from Chinese supplies and taken a government stake in MP Materials Corp, which operates the only US rare earths mine, in California. The US Department of Defense will pay guaranteed minimum prices for MP Materials’ supplies for a decade, protecting the company from sudden market swings.
For its part, the EU adopted the Critical Raw Materials Act in 2024 and this week is set to announce the details of its new RESourceEU initiative. Both are meant to decrease resource dependence on China by developing domestic supply chains and critical minerals partnerships with other countries outside the bloc. German development bank KfW set up a €1 billion raw materials fund a year ago.
Armin Papperger, chief executive officer of Germany’s biggest arms maker, Rheinmetall AG, said on an earnings call in early November that the company was conducting weekly raw material stress tests. He noted that its automotive business faced greater difficulties than its larger defence branch because it needed more rare earths.
“We have billions in our stock at the moment,” Papperger said on the call in reference to critical materials and components.
Smaller companies can’t often afford such measures, and rare earths stockpiling creates the risk of getting stuck with costly excess.
Hans Christoph Atzpodien, chairman of the Federation of German Security and Defence Industries, disputed that European companies were unprepared for China’s rare earths restrictions. He noted that processing — not mining the minerals themselves — was the main hurdle for creating domestic supplies.
“Rare earths are also found in Europe and even in Germany. However, in the past, we have been happy to outsource processing to China, which is no longer feasible,” Atzpodien said in a statement from the association.
Rare earths processing produces hazardous byproducts, which makes it difficult to get regulatory approval, and many European countries lack refining technology. In France, Borgschulte said, some rare earths companies have lured workers out of retirement so they can rebuild institutional knowledge.
Germany is negotiating a potential submarine deal with Canada that could include Berlin’s investing in mining and processing there. Canada has some of the world’s largest rare earth reserves, estimated by the government at over 15.2 million tonnes.
European allies should work together on making rare earth supply chains less reliant on China, said Thorsten Benner, co-founder and director of the Global Public Policy Institute in Berlin.
“It has to be: ‘Whatever it takes’ — just like in the Euro crisis,” he said.
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