Companies should increase their expenditures on obtaining scarce rare earth elements
In the second quarter, prices for rare earth elements such as terbium, yttrium, and gadolinium saw a significant increase in the German industry, with terbium rising nearly 28%. This steep rise is primarily due to China's export controls and supply restrictions on these critical materials.
China, the dominant global supplier, has tightened export controls on heavy rare earth elements and materials essential to high-tech industries. This move has exposed Europe's supply chain vulnerabilities, leading to supply shortages and creating systemic risks. Germany, which depends on China for over 70% of its rare earth imports and up to 80% of rare earth-containing components like permanent magnets (essential for electric vehicles), has been particularly affected.
The export controls extend beyond direct rare earth compounds to intermediate products such as magnets and alloys used heavily in German manufacturing, especially in the automotive sector. Even indirect imports often trace back to Chinese sources, making European industries highly exposed to the export controls and bottlenecks set by China.
The restrictions have caused supply deficits and production disruptions, inflating rare earth material prices due to under-supply and heightened demand, especially in electric vehicle motors and high-tech industrial applications dependent on rare earth magnets. This also amplifies costs across production lines and threatens the output of large sectors of Germany’s economy linked to these materials.
The lack of materials like electric motors and sensors is a concern due to the imposed controls. Bertram Brossardt, CEO of the Association of Bavarian Chambers of Industry and Commerce (vbw), stated that current uncertainty is evident.
The escalating trade dispute between China and the US has also played a role in the price increases. Gold, used in various industries, increased by 15% due to this dispute, becoming more expensive than rare earths overall. The increased cost of gold could lead to further uncertainty in the industrial market.
The need for stability in the industrial materials market is emphasized due to the trade dispute. Stability in the rare earths market is urgently needed, according to Brossardt. Yttrium, essential for high-performance ceramics, increased by 17% in the second quarter, while gadolinium, used in magnets, increased by 15%.
In summary, Chinese export controls on rare earths and magnets are contributing to the price increase of these resources, causing supply deficits and production disruptions in Germany. The escalating trade dispute between China and the US could have far-reaching impacts on various industries, underscoring the need for stability in the industrial materials market.
The Chinese export controls on rare earth elements and related materials, such as magnets and alloys, have caused significant price increases in the European finance sector, creating potential risks for investments in the energy industry. The trade dispute between China and the US has not only led to a 15% increase in gold prices, affecting various industries, but also amplified the demand for rare earth materials, pushing their prices higher, including a 17% increase in yttrium and a 15% increase in gadolinium. This situation highlights the urgent need for financial institutions to invest in the creation of a more diverse and stable supply chain for industrial materials in the industry.
