A rare opportunity: What are the chances for reducing rare earth dependence?

China is using its market dominance in rare earths to exert geopolitical pressure – not just in the trade dispute with the US. The high dependence on China in rare earths also exposes Europe and Germany to a ‘single point of failure’, laying bare the possible consequences of supply disruptions for industry and national security. Germany’s high manufacturing share makes it particularly vulnerable. In 2024, the share of direct imports from China was above the EU average, at around 62%. Nearly 90% of Germany’s imports of permanent magnets came directly from China. This KfW Research Focus looks to the future. Will Germany and the EU remain vulnerable? Besides the high geographical concentration, price volatility poses a challenge for investment – despite rapidly growing demand. But there are also cautious trends towards more diversification. Whether the EU can benefit depends in part on the speed of implementation.

A rare opportunity: What are the chances for reducing rare earth dependence?(PDF, 530 KB, accessible)