China is limiting the flow of critical minerals — which are needed to make everything from bullets to jet fighters — to Western defense manufacturers.
While Beijing allowed them to start flowing after the Trump administration agreed in June to a series of trade concessions, China has maintained a lock on critical minerals for defense purposes.
As a result, one drone-parts manufacturer that supplies the US military was forced to delay orders by up to two months while it searched for a non-Chinese source of magnets, which are assembled from rare earths.
Certain materials needed by the defense industry now go for five or more times what was typical before China’s recent mineral restrictions, according to industry traders. One company said it was recently offered samarium — an element needed to make magnets that can withstand the extreme temperatures of a jet-fighter engine — for 60 times the standard price. That is already driving the cost of defense systems higher.
The squeeze on critical minerals highlights how dependent the US military is on China for much of its supply chain — giving Beijing leverage at a time of rising tensions between the two powers and heated trade negotiations. Defense manufacturers supplying the US military rely on minerals that are mainly produced in China for microelectronics, drone motors, night-vision goggles, missile-targeting systems and defense satellites.
While companies have tried to find alternative sources of these minerals in recent years, some of the elements are so niche that they can’t be economically produced in the West.
In addition to the more recent export controls on rare earths, China has since December banned sales to the US of germanium, gallium and antimony — which are used for things like hardening lead bullets and projectiles, and to allow soldiers to see at night.
Some companies now warn of looming production cuts if more minerals aren’t forthcoming.
Leonardo DRS is down to its “safety stock” of germanium. The company is the US subsidiary of Italian defense giant Leonardo. Germanium goes into the company’s infrared sensors, which are used in missiles and other equipment.
Drone manufacturers are among the most vulnerable, because many are small startups and have very limited revenue or supply-chain savvy, and never got around to acquiring large stockpiles of rare-earth magnets and metals.
More than 80,000 parts that are used in 
DOD weapons systems are made with critical minerals now subject to Chinese export controls. Nearly all of the supply chains for key critical minerals used by the Pentagon rely on at least one Chinese supplier, meaning restrictions from Beijing can cause widespread disruptions.
Since stepping up export controls earlier this year, China has begun requiring companies to provide extensive documentation of how they will use the rare earths and magnets they import. Chinese regulators often demand sensitive information, such as product images and even photos of production lines, to ensure none of the materials go to military use.
Metal traders say that because China demands to know the end user of rare-earth magnets and metals, it isn’t approving licenses for traders to stockpile.
Early last year DOD established the Critical Minerals Forum, an effort in part to spur more mineral supply-chain projects in the US and allied countries, including helping metals miners secure funding to increase their output of critical materials like antimony and germanium.
Defense companies that traditionally outsourced the purchase of critical minerals to sub-suppliers are now using their market heft to try to acquire sources of key materials themselves. Major defense companies “are starting to get more and more panicked as they go, because they recognize that they’re just not going to get the magnets, no matter what happens, unless they get involved.”
wsj.com/world/asia/chi
DOD weapons systems are made with critical minerals now subject to Chinese export controls. Nearly all of the supply chains for key critical minerals used by the Pentagon rely on at least one Chinese supplier, meaning restrictions from Beijing can cause widespread disruptions.
Since stepping up export controls earlier this year, China has begun requiring companies to provide extensive documentation of how they will use the rare earths and magnets they import. Chinese regulators often demand sensitive information, such as product images and even photos of production lines, to ensure none of the materials go to military use.
Metal traders say that because China demands to know the end user of rare-earth magnets and metals, it isn’t approving licenses for traders to stockpile.
Early last year DOD established the Critical Minerals Forum, an effort in part to spur more mineral supply-chain projects in the US and allied countries, including helping metals miners secure funding to increase their output of critical materials like antimony and germanium.
Defense companies that traditionally outsourced the purchase of critical minerals to sub-suppliers are now using their market heft to try to acquire sources of key materials themselves. Major defense companies “are starting to get more and more panicked as they go, because they recognize that they’re just not going to get the magnets, no matter what happens, unless they get involved.”
wsj.com/world/asia/chi
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Byron Wan
@Byron_Wan
China produces the entire world’s supply of samarium, a particularly obscure rare earth metal used almost entirely in military applications — the manufacture of magnets for missiles, fighter jets, etc. Samarium magnets can withstand temperatures hot enough to melt lead without x.com/Byron_Wan/stat…