China’s Mineral Squeeze: Defense Tech Manufacturers Scramble as Supply Chains Crumble

Critical shortages hit defense tech as China tightens its grip on key minerals—sector braces for production chaos.

Supply chain chokehold: Beijing's export controls send shockwaves through Western defense manufacturers.

From rare earths to tungsten, the Pentagon's shopping list just got 50% harder to fulfill—unless you enjoy paying Wall Street's 'geopolitical risk premium.'

Pentagon contractors scramble to hold onto limited stock

China’s rare earth dominance isn’t new. It already supplies about 90% of global demand. But the new restrictions target materials used specifically in weapons.

Some companies are paying five times the regular price. Others are being quoted up to sixty times more. Samarium, for example, which is needed for magnets that can survive the heat of a jet engine, recently hit record offers.

Bill Lynn, the chief executive of U.S.-based Leonardo DRS, said on a recent call that the company is now down to its “safety stock” of germanium. “In order to sustain timely product deliveries, material FLOW must improve in the second half” of 2025, he warned.

The company uses germanium in its infrared sensors for missiles and other weapons systems. Lynn added that they’re now working on alternative sourcing and trying to redesign products so they don’t rely on the mineral.

The Pentagon has told all contractors they must stop buying magnets made with China-linked minerals by 2027. But stockpiles aren’t deep. Some companies hold less than a year’s supply.

Others only have weeks of inventory. And drone startups, which are usually underfunded and lack the expertise to manage global supply chains, are the most vulnerable.

Shipping delays and strikes add more pressure

New Hampshire’s ePropelled, which builds propulsion systems for drones, recently got hit with demands from their Chinese supplier. The forms asked for detailed photos of products and buyer lists to prove the magnets wouldn’t be used for military purposes.

Traders say China is also making it nearly impossible to build a reserve. They won’t approve licenses for traders who don’t declare exactly who the end users are. That’s cutting off the ability to store rare earths in advance.

To fight back, the Department of Defense is spending big. It gave $14 million to a Canadian company last year to increase germanium production. In July, it put $400 million into MP Materials, which owns the largest rare earth mine in the Americas.

Lockheed CEO James Taiclet said that investment will help secure magnets for F-35 jets and cruise missiles, though he admitted that supply won’t come online fast enough.

The Pentagon also set up the Critical Minerals Forum last year to help U.S. and allied mining projects secure funding.

There are already signs of how far China will go to block access. Earlier this year, United States Antimony Corporation tried to ship 55 metric tons of antimony from Australia to its smelter in Mexico, passing through the Chinese port of Ningbo. The shipment got held in customs for three months.

When China finally released it in July, they forced the company to send it back to Australia. The seals were broken when it arrived, and the company is now investigating whether the load was tampered with. “The shipping company, everyone who was involved, they’d never seen this happen before,” CEO Gary Evans said.

On top of all this, Boeing just got hit with a labor strike. More than 3,200 workers walked off the job in St. Louis and Illinois after rejecting a second contract offer. The rejected deal included a $5,000 ratification bonus, a 20% general raise, and better vacation and sick leave. Boeing said it had a contingency plan ready to go and called the offer fair.

“We’re disappointed our employees in St. Louis rejected an offer that featured 40% average wage growth,” said Dan Gillian, who manages the St. Louis operations. The same contract terms were already rejected once the week before.

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