China Is Choking Supply Of Critical Minerals To Western Defense Companies

Beijing's tightened controls are a sign of the leverage it has over the U.S. military supply chain

- Jon Emont, Heather Somerville & Alistair MacDonald

China is limiting the flow of critical minerals to Western defense manufacturers, delaying production and forcing companies to scour the world for stockpiles of the minerals needed to make everything from bullets to jet fighters.

Earlier this year, as U.S.-China trade tensions soared, Beijing tightened the controls it places on the export of rare earths. 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.

China supplies around 90% of the world's rare earths and dominates the production of many other critical minerals.

As a result, one drone-parts manufacturer that supplies the U.S. 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, say suppliers and defense executives.

The squeeze on critical minerals highlights how dependent the U.S. 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 U.S. military rely on minerals that are mainly produced in China for microelectronics, drone motors, night-vision goggles, missile-targeting systems and defense satellites.