Failure to supply a raw material can bring entire production lines to a standstill. A current study shows how German industry still trivializes its dependencies.
According to an analysis by the Boston Consulting Group, German industry underestimates the risks caused by a lack of raw materials. Bottlenecks are caused both by export restrictions by China and by increasing demand in some industries. China controls much of the processing capacity of critical raw materials, making it all the more difficult to reduce dependencies.
The raw materials trader tk accelis sees significant supply risks and warns of the impact on entire production lines. There is only insufficient support from politics: only a fifth of financing commitments from the KfW development bank for raw material projects were implemented in 2025.
Dusseldorf. A 500 percent price increase – for a raw material without which numerous machines in German industry could come to a standstill. Since China restricted the export of tungsten, the costs for an important intermediate product have risen dramatically at times.
The tungsten price shock is an example of a problem that affects large parts of German industry. Nevertheless, industrial companies underestimate their dependence on critical raw materials. This was the result of a new analysis by the management consultancy Boston Consulting Group (BCG), which is available exclusively to Handelsblatt.
The dangers therefore extend far beyond rising purchase prices. In the worst case, a lack of materials could bring production to a halt in entire industries. The focus is not only on well-known raw materials such as lithium or rare earths. According to the consultants, materials whose global market is comparatively small but which are indispensable for the production of high-quality industrial products pose particularly great risks.
An example is gallium. The entire global market is worth less than $350 million annually, according to BCG. At the same time, end products worth an estimated $3.5 trillion depend on it. Gallium is needed, among other things, for powerful semiconductors, communications technology and artificial intelligence components.
The magnitude of the impending shortages of other raw materials is also significant. According to BCG calculations, demand for selected critical raw materials could increase to 120 to 250 percent of forecast supply by 2040. The reason for the impending bottlenecks is also the increase in demand for critical raw materials. Because they are found in batteries and semiconductors, demand is growing through electromobility, artificial intelligence and defense projects.
According to BCG, the fact that German companies systematically underestimate the resulting risks is because they calculate raw material risks primarily based on direct suppliers and purchasing costs. But that is not enough. Critical raw materials are not only found in directly purchased materials, but also in motors, sensors, semiconductors and tools that are used to produce them. Even companies that do not procure certain raw materials themselves can therefore be affected by delivery bottlenecks.
The price increase for tungsten shows how quickly this can become a problem. The current situation with the industrial metal is “particularly critical,” explains Markus Heseding from the precision tools department of the Association of German Mechanical and Plant Manufacturers (VDMA). The entire cutting tool manufacturer industry is suffering from price developments - including the tungsten precursor product ammonium paratungstate, or APT for short. This is a significant burden for the tool manufacturers. Because tungsten is found in hard metal tools, which are indispensable in industrial production. Without them, companies cannot process numerous components.
The association is also closely monitoring the supply of cobalt. Synthetic diamonds, diamond powder and diamond grinding wheels could also become a problem. China issued corresponding export controls at the end of 2025, the application of which was suspended until January 2027. If the restrictions take effect, the VDMA warns of similarly drastic effects on delivery quantities and prices as with tungsten.
Companies have already responded with warehousing, recycling, participation in raw material projects and the search for alternative suppliers. However, these options are limited if states intervene in the markets through export controls and subsidies, according to Heseding. By this the expert means China's industrial policy. In the past few months, the People's Republic has repeatedly restricted the export of critical raw materials to individual markets. The government also intervenes in competition through state support for certain industrial sectors.
Further results of the BCG analysis show how great China’s influence actually is. To do this, the focus must be shifted from funding to processing. Only two percent of the world's cobalt mining capacity is located in China. However, according to BCG calculations, Chinese owners account for 47 percent of the raw material's global processing capacity. The picture is even clearer when it comes to nickel processing. While 31 percent of refining capacity is located in China, according to the analysis, 76 percent worldwide is under Chinese ownership control. What this means for industry is that even switching to a raw material supplier outside of China does not necessarily reduce dependence on Chinese companies.
The raw materials trader tk accelis, the former materials division of Thyssenkrupp that was recently listed on the stock exchange, confirms how serious the situation is. “We see particularly high supply risks for certain rare earths, including yttrium, dysprosium and terbium, as well as gallium, germanium, antimony and tungsten,” says Sebastian Kihm, Chief Operating Officer in Trading at tk accelis. What is crucial is the concentration of extraction, processing and refining with a few providers. In addition, there are export controls and approval procedures that could limit access to the materials in the short term. “A few kilograms of a critical raw material can decide whether an entire production line runs,” says Kihm.
Tk accelis has observed significant price jumps and limited availability, particularly with Yttrium. There were also significant market distortions for germanium. The demand for better protection is therefore increasing. According to Tk accelis, more and more industrial companies and states are interested in additional sources of supply and strategic reserves of raw materials. The trader himself relies, among other things, on long-term purchase contracts with raw material producers. Examples include agreements with NioCorp for ferroniobium, Hastings for rare earths and EcoGraf for graphite.
Such contracts are also important for new funding projects. According to Kihm, without reliable offtake agreements and options for price hedging, it will be more difficult for new mining projects to obtain equity and debt capital. In order for investors to provide money, they need economically viable business models and, if possible, long-term secured buyers. This creates a conflict of objectives for the industry: Anyone who wants to secure their supply independently of dominant providers must make long-term commitments at an early stage and accept higher costs.
This is exactly where politics should help. Industrialized countries around the world are making billions available to finance new raw material projects and reduce their dependence on individual supplier countries. In 2025 alone, public financing commitments for critical raw materials in industrialized countries reached around $65 billion, according to BCG. That was more than four times as much as in 2023. But implementation is making slow progress in many places. According to the analysis, a large part of the announced funds have not yet been used.
In Germany, the raw materials fund of the KfW development bank is intended to support projects that contribute to the secure supply of critical raw materials to German and European industry. However, according to BCG, only around $224 million of the fund volume, which was originally estimated at around one billion US dollars, had been committed to two projects by the end of September. That corresponds to about a fifth. Specifically, this involves financing for the lithium project of the German-Australian energy company Vulcan worth the equivalent of $168 million and another for the rare earth project of the Australian mining company Arafura worth $56 million.
