A Commodity Shortage on November 10? Germany's Industrial Sector Is Alarmed—But Unprepared

A recent survey by the German Economic Institute of approximately 900 companies shows that this threat has now reached the German economy. Six out of ten companies that rely directly or indirectly on critical commodities fear production stoppages or delays should China expand its restrictions. 88 percent expect higher procurement costs, and 71 percent anticipate supply bottlenecks. Four out of ten companies even fear that this could cause them to lose customers or, in the worst case, go bankrupt.
So German industry is certainly alarmed. But it is still far from prepared. Alternative suppliers are scarce, strategic reserves are only just being built up, and new production and processing capacities will not deliver any additional volumes until November.

The reprieve granted in Busan applied only to the particularly far-reaching package of measures from October 2025. The existing controls on samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium remained in effect and led to shortages, particularly for yttrium, dysprosium, and terbium. Starting November 10, controls could be extended to include holmium, erbium, thulium, europium, and ytterbium, as well as key processing facilities and technologies. Even neodymium magnets and components manufactured outside of China could then require approval from Beijing if they contain Chinese dysprosium or terbium. This would extend China’s reach deep into international supply chains. Gallium and germanium have been subject to their own Chinese export controls since 2023. There, too, stricter licensing procedures have tightened the supply—for example, of semiconductors and infrared optics. Although these are not part of the suspended rare earth package, they demonstrate how quickly Beijing can put pressure on supply chains through export licenses.

The situation is particularly delicate for German companies with their own factories in China. To obtain export licenses, the authorities may require detailed information on end customers, buyers, and intended uses. This gives Beijing insight into international value chains and sensitive business relationships. This dependency works both ways: Companies need Chinese commodities—and at the same time, they need approval from Chinese authorities to ship products made from those commodities to other locations or customers.
We already analyzed in July why another extension of the suspension is by no means a foregone conclusion. That article highlights the geopolitical conflicts that stand in the way of lasting de-escalation: “The Perfect Storm for Critical Commodities.”

China has recently been increasingly rationing its shipments to different countries: some get materials, others don’t. Almost like on St. Nicholas Day, Beijing decides who gets candy and who gets only coal (and sometimes even a spanking). The U.S. has recently been receiving larger quantities of yttrium oxide and permanent magnets again. From China’s perspective, Japan had behaved “naughtily” with its prime minister’s remarks on Taiwan—and for months received neither dysprosium oxide nor terbium oxide. If even Japan—which has been systematically reducing its dependence on China since 2010—is being pressured in this way, just how vulnerable are Germany and the rest of Europe?

Washington is taking tough action. Effective January 1, 2027, contractors for the U.S. Department of Defense will generally no longer be permitted to supply certain magnets, as well as tantalum and tungsten products, if the material was mined, separated, refined, or further processed in China. For neodymium-iron-boron and samarium-cobalt magnets, this applies to the entire supply chain, all the way to the finished magnet. This is not a general import ban, but a clear voluntary commitment within the military sector. The problem: China can simply have itself removed from a supply chain by regulation—this does not, however, result in a lack of separation facilities or production capacity.

When it comes to mining, the U.S. is now in a comparatively strong position. The bigger gaps begin after that—in separation and refining, the production of metals and alloys, and the manufacturing and certification of finished magnets. Each of these stages requires its own facilities, specialized knowledge, and industrial experience. This cannot be built up in a matter of months. Should China tighten restrictions on November 10, the West will therefore be unable to replace the lost supply in time.

In its attempt to make its military supply chains China-free by January 2027, the U.S. is running into trouble. USA Rare Earth illustrates just how massive this undertaking is. The company is attempting to integrate mining, separation, metal and alloy production, and the manufacture of finished magnets into a single, end-to-end supply chain. Initial magnet production is already ramping up, but material from the company’s own mine isn’t expected until late 2028. In the meantime, a critical gap remains: there isn’t yet enough capacity outside of China for separation and further processing. This supply chain cannot be closed by January.

USA Rare Earth’s approach makes sense despite the remaining gaps. Companies that integrate multiple stages of the supply chain can better control the origin and flow of materials and gradually reduce dependencies. Noble Elements is also following this path, evolving from a pure commodity trader toward commodity production. Such companies can become key building blocks of an independent supply chain. However, this will not result in any additional supply until November 10. In-house mining, separation, and processing are solutions for the coming years—not for the coming months.

For a long time, German industry feared that taking a tougher stance toward China could provoke new retaliatory measures. Now, the BDI and its member associations are discussing faster antidumping and antisubsidy proceedings, a simpler evidentiary process, and a more consistent use of European trade defense instruments. Added to this are familiar calls: diversifying supply chains, building up strategic reserves, strengthening recycling, and creating Europe’s own processing and magnet manufacturing capacities.
The change in course is necessary. However, it comes at a time when most of these measures will no longer be effective by November 10. Anti-dumping and anti-subsidy proceedings can counter artificially cheapened or state-subsidized imports, for example through additional tariffs or minimum prices. They thus protect against unfair competition—but they do not supply terbium. New mines and processing facilities take years to build. Even companies like Noble Elements, which are shifting from raw material trading toward in-house production, can only close further gaps in the supply chain in the medium to long term.

A complete halt to raw material exports is rather unlikely. It is more likely that Beijing will link the suspension to further concessions and continue to carefully manage its shipments. If the negotiations fail, however, the suspended controls could be reinstated.
An initial preliminary decision could be made as early as the meeting between Trump and Xi in September. For German industry, however, the fundamental problem remains: whether materials flow, when they arrive, and who receives them will continue to be decided primarily in Beijing. We will therefore closely monitor the signals emerging from the talks—and what they mean for Europe’s raw material supply.