As Europe prepares to undertake its most ambitious rearmament drive since the Cold War, its defense industries are confronting a critical vulnerability: a rapidly tightening supply of rare earth minerals essential for modern weapons systems.

According to a new Bloomberg report, US companies are moving far faster and with far greater coordination to secure these materials, leaving European firms at risk of production disruptions within months.

Despite a year-long rare earths trade truce between Washington and Beijing, China continues to impose strict controls on exports, including an outright ban on sales to companies involved in weapons manufacturing. That has increased the importance of stockpiles already outside Chinese control, and turned the competition for rare earth minerals into a race that Europe is losing.

US firms move quickly as European supplies dwindle

Traders say the difference in procurement speed is stark.

Tim Borgschulte, CFO of Berlin-based raw materials trader Noble Elements, told Bloomberg that selling a ton of terbium to an American buyer typically takes “three to four days,” compared with “three to four weeks” for European customers, a delay that has become increasingly costly as supplies shrink.

Rare earth minerals are vital for the production of advanced sensors, precision motors, missile guidance systems, and propulsion components used across frigates, fighter jets, and military drones. A source at a European defense company warned that the continent’s stockpiles may be depleted within months.

US defense companies, by contrast, are leveraging their financial firepower to secure rare earths further upstream in the supply chain. Jan Giese of Frankfurt-based Tradium GmbH said this approach reduces visibility of the transactions, a deliberate tactic to shield suppliers from potential future restrictions and ensure steady access to components.

Europe’s fragmented approach draws criticism

European firms, Bloomberg reports, often buy directly and without coordination with key suppliers. Traders say many defense manufacturers lack clarity on what mineral grades they require or when they will need them, resulting in last-minute purchasing that inflates costs and deepens shortages.

A German defense industry source said US competitors are aggressively sweeping the European market, often leaving only small quantities available, and at significantly higher prices.

Compounding the problem is that the EU has no restrictions on where rare earths stored in Europe can be exported, allowing stockpiles to flow to other continents when prices spike.

Read more: US, Australia sign rare earths framework amid China's export controls

China’s dominance amid Washington’s push

China remains the world’s dominant processor of rare earths, and material sold before April 2025, when new Chinese restrictions on defense-linked exports entered into force, is being snapped up quickly.

Washington has sought to insulate its defense sector by taking a government stake in MP Materials Corp., which operates the United States’ only rare earths mine. The US Department of War has guaranteed minimum purchase prices for the company’s output for the next decade, ensuring supply stability regardless of market volatility.

Europe ramps up policy response, but lags persist

The EU is trying to catch up. After adopting the Critical Raw Materials Act in 2024, Brussels is preparing to unveil the RESourceEU initiative, aimed at building domestic supply chains and reducing reliance on China through new international raw materials partnerships. Germany’s KfW development bank launched a €1 billion raw materials fund last year.

Some major European defense manufacturers are already stockpiling aggressively. Rheinmetall CEO Armin Papperger said this month that the company is conducting weekly “raw material stress tests” and currently holds “billions” of euros worth of critical supplies.

But smaller companies cannot match that level of investment, and stockpiling carries its own risks, including being stuck with costly excess should markets shift.

Hans Christoph Atzpodien, head of the Federation of German Security and Defence Industries (BDSV), insisted the issue is not a lack of preparedness, but Europe’s long-standing dependence on Chinese processing capacity. Rare earths exist in Europe, he said, but environmental regulations and lost industrial know-how have stalled the development of domestic refining.

Europe looks abroad and to allies

Germany is in talks with Canada, which possesses over 15 million tonnes of rare earth reserves, about a submarine deal that could include German investment in Canadian mining and processing sectors.

Analysts argue that cooperation among European states is essential.

Thorsten Benner of the Global Public Policy Institute told Bloomberg that EU governments should adopt a crisis-level mindset.

“It has to be: ‘Whatever it takes’, just like in the Euro crisis,” he said.

Europe’s race to rearm, the report suggests, may hinge not only on political will or defense budgets, but on its ability to secure the rare earth minerals that power 21st-century warfare, and on whether it can match the speed and strategic coordination of its US allies.

Read more: China holds the rare earth power behind US military might: FP