Hamburg, Germany – German manufacturers are facing increasing disruption as China tightens its control over the export of rare earth elements, critical components in a vast array of modern technologies. The situation is particularly acute for businesses in northern Germany, where supplies from Chinese partners have effectively halted in recent months.
Jan Menssing, managing director of the Hamburg-based chemical trading company MCC, described the current situation as critical. “For months, no goods have been arriving from China in the north,” he said. “Our long-standing Chinese trading partners are no longer receiving approval from the Ministry of Commerce in Beijing to export these rare earths.” Menssing is now relying on dwindling stockpiles, acknowledging that these reserves are finite. “Everyone is aware that this supply will eventually run out,” he stated, adding that prices have soared dramatically.
The disruption comes as Chancellor Friedrich Merz is currently visiting China, with many German companies hoping he will address the issue directly. However, the situation highlights a broader vulnerability within the German industrial base – a heavy reliance on China for essential minerals powering its green and digital transitions.
A Critical Dependence
Rare earth elements are a group of 17 chemically similar metals crucial for the production of everything from electric vehicles and wind turbines to smartphones and medical devices. Despite their name, these elements are not particularly rare in the Earth’s crust. However, China dominates both the mining and processing of these materials, controlling a significant portion of the global supply chain. Historically, lower prices from China have discouraged the development of alternative sources and processing capabilities elsewhere.
The impact extends far beyond the chemical industry. Rotek, a motor manufacturer based in Bremerhaven, is also heavily reliant on Chinese suppliers, but has taken steps to mitigate the risk by building up its own reserves. The broader German economy is at stake, with over one million jobs linked to industries dependent on rare earth elements, according to the Institute of the German Economy (IW).
China’s tightening of export controls, which began in April 2025, requires foreign companies to obtain licenses for shipments, creating significant bureaucratic hurdles. While Beijing announced in December 2025 that it would ease export restrictions, no tangible changes have been observed.
Geopolitical Implications
The situation is unfolding against a backdrop of increasing geopolitical tensions and a growing strategic rivalry between China and the West. The United States secured a one-year suspension of China’s restrictions following a summit between Presidents Trump and Xi in South Korea, but Europe was excluded from the agreement, leaving German manufacturers particularly exposed. This disparity has prompted a reassessment of Germany’s China policy, accelerating a trend towards “de-risking” – reducing dependence on a single supplier.
Cornelius Bähr of the IW emphasized the need for a long-term strategy. “If we want to move away from this Chinese dependence, we will need to invest time and money,” he said. “Which means investing in mines from which rare earths can be extracted, but also activating the technologies that exist in Europe and other countries to further process these rare earths.” He also highlighted the importance of strengthening the circular economy and expanding recycling initiatives.
The current crisis underscores the strategic importance of securing access to critical raw materials. While China maintains a dominant position, alternative sources exist in countries like the United States, Australia, and within Europe itself. However, developing these sources requires significant investment and a shift away from a reliance on low-cost Chinese supplies.
Searching for Alternatives
MCC’s Jan Menssing acknowledges the need for a “Plan B,” recognizing that the Chinese market is currently indispensable. “We need to broaden our base,” he said, adding that his company is actively seeking to diversify its supply chains and explore alternative commodities.
The German government faces a complex challenge: balancing the need to secure access to critical materials with the desire to maintain economic ties with China. The current situation serves as a stark reminder of the risks associated with over-reliance on a single supplier and the importance of building a more resilient and diversified supply chain. The long-term implications of China’s export controls remain uncertain, but the immediate impact on German industry is already being felt, prompting a fundamental reassessment of its economic relationship with Beijing.
