Germany Faces Rising Costs and Strategic Risks from China’s Raw Material Dominance

Germany is increasingly confronted with a costly dependency on China for critical raw materials, particularly lithium and rare earth elements essential for electric mobility and renewable energy technologies. A key example is Vulcan Energy, a startup founded in 2018 by German geologist Horst Kreuter and Australian Francis Wedin, which aims to supply over 40% of Europe’s lithium demand by extracting it from geothermal water in southwest Germany. However, Vulcan struggled to attract German investors, who often focus on cost rather than strategic value, leading the company to rely largely on Australian funding. This underinvestment reflects broader German industry patterns that have left the nation reliant on cheaper Chinese supplies. China currently monopolizes the rare earths market and has tightened export restrictions, exacerbating risks for German manufacturers.

Recognizing these dangerous dependencies amid shifting geopolitics, the European Investment Bank has pledged €2 billion to reduce the EU's reliance on Chinese raw materials by bolstering mining, processing, and recycling capabilities. German Chancellor Friedrich Merz has emphasized that securing technological sovereignty is now a central security issue for the country. Critics note that despite earlier calls to develop a national raw material strategy, Berlin’s response has been slow, prompting industry leaders to demand more proactive government involvement. They advocate for enhanced collaboration between politics and industry to secure reliable access to these vital resources and mitigate the economic and geopolitical risks posed by China’s dominant position.

This evolving situation highlights a critical crossroads for Germany: balancing cost considerations against strategic imperatives in its supply chains, while seeking to foster domestic innovation and investment to reduce external dependencies that threaten future technological and economic security.