Prices for germanium, a metal essential for producing infrared military equipment such as fighter jets and missiles, have reached a remarkable high this month, climbing to $5,000 per kilogram. This surge marks a 14-year peak, driven by Chinese export restrictions on critical and rare earth metals that are significantly disrupting supply chains for Western military systems. According to data from price reporting agency Fastmarkets, this price is five times higher than the $1,000 per kilogram recorded in early 2023.
The ramifications of the supply crunch, first announced in 2023, have led to heightened concern among customers scrambling to secure supplies of germanium. As reported by the Financial Times, traders indicate that the current market has largely dried up, forcing many to seek alternative sources.
China’s Dominance and Market Disruption
China’s substantial control over the global market for critical minerals has placed Western defense manufacturers in a precarious position, as they increasingly rely on Chinese exports amid escalating diplomatic tensions. The International Energy Agency (IEA) has warned in its latest annual report, Global Critical Minerals Outlook, that the concentration of critical minerals supply among a limited number of countries, coupled with China’s export controls, creates a risk of “painful disruptions” in the market.
Despite significant efforts and government backing in the West to develop domestic supply chains, the IEA’s findings reveal that China has maintained and even increased its market share over recent years. This ongoing shortage has compelled companies to explore sourcing materials directly from suppliers outside China or to establish domestic manufacturing capabilities.
Strategic Moves by Western Companies
In response to these challenges, companies like Lockheed Martin are taking proactive steps to secure their supply. Last month, Lockheed Martin entered into a strategic agreement with Korea Zinc, aimed at procuring germanium while collaborating on the critical minerals supply chain. The memorandum of understanding specifies that Korea Zinc will provide germanium smelted outside of China, North Korea, Iran, and Russia. In turn, Lockheed Martin will pursue an off-take agreement to ensure priority access to this output.
Meanwhile, Nyrstar, a subsidiary of trading giant Trafigura, is evaluating a project to construct a germanium and gallium recovery and processing facility at its zinc smelter in Clarksville, Tennessee. This facility is notable as the only primary zinc producer in the United States, highlighting the significant push for domestic capabilities in the face of international supply challenges.
As the situation evolves, the implications of rising germanium prices and strained supply chains will likely continue to resonate through the defense industry and beyond, underscoring the critical importance of securing reliable access to essential materials.
