American defense manufacturers are reportedly grappling with China’s decision to limit the supply of critical minerals. This move has resulted in production delays and a global scramble for mineral stockpiles.
Defense Firms Struggle As China Tightens Mineral Grip
Amid rising U.S.-China trade tensions, China tightened its export controls on rare earths earlier this year. Despite easing these restrictions following trade concessions from the Trump administration in June, China continues to control critical minerals for defense purposes, reported The Wall Street Journal.
China’s dominance in the global production of many critical minerals, including supplying about 90% of the world’s rare earths, has significant implications. Leonardo DRS Inc. (NASDAQ:DRS), for instance, had to postpone orders by two months while seeking non-Chinese magnet sources, which are made from rare earths.
The restrictions have led to a sharp increase in the prices of materials required by the defense industry. One company was quoted a price for samarium, a crucial element for making jet-fighter engine magnets, at 60 times the standard rate. This has resulted in the cost of defense systems skyrocketing, according to suppliers and defense executives.
AI, Drones Drive Urgency In Rare Earth Supply Effort
The U.S. has been grappling with a critical vulnerability in its supply chain concerning rare earth supply amid rising tensions and ongoing trade talks.
Defense contractors depend on Chinese-sourced minerals for microelectronics, drone motors, night-vision goggles, missile-targeting systems, and defense satellites.
Furthermore, the Defense Secretary Pete Hegseth‘s move to fast-track drone manufacturing and deployment has added to the urgency of securing a stable supply of rare earths.
In a recent development, MP Materials Corp. (NYSE:MP) CEO James Litinsky highlighted the critical role of rare earth magnets in powering the AI industry and how the U.S. can secure its position in the global AI race. This comes on the heels of its $400 million Pentagon deal to secure the rare earth supply chain.
On its recent earnings call, Lockheed Martin (NYSE:LMT) CEO James Taiclet hailed the MP Materials deal as groundbreaking for securing magnet supplies for F-35 jets and cruise missiles, but noted that establishing new supply chains will take time.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
