Another three million jobs are indirectly linked to critical raw materials, according to a McKinsey analysis. In addition to increased recycling and joint procurement platforms for companies, strategic stockpiling is expected to improve supply security.
From little-known elements with obscure names to a geopolitical tool: rare earths have had quite a remarkable rise over the past few decades. Just last week, China once again pushed them into global headlines. The world’s main producer of rare earths has sharply tightened its export restrictions across the entire value chain of these critical resources. The move likely comes in response to similar U.S. measures aimed at restricting China’s access to advanced semiconductor chips.
The exact effects on supply chains will only become clear in the coming months, but the pressure on global availability is expected to increase significantly. Following China’s last round of export restrictions, introduced in April for certain rare earths, shipments of some of these elements temporarily fell to zero.
A new analysis (in German language) by consulting firm McKinsey illustrates just how much depends on elements like neodymium and terbium: around one million people in Germany work in industries that rely on these metals—such as the automotive sector, energy supply, mechanical engineering, and medical technology. Their combined annual contribution to GDP amounts to roughly €150 billion.
Nine Percent of GDP at Risk
About three million additional jobs in sectors such as retail and hospitality are indirectly tied to rare earths, since they depend on spending by employees in manufacturing. According to McKinsey, this represents an additional value-added effect of around €220 billion. If China, by far the largest supplier of rare earths, were to fall away, roughly nine percent of Germany’s total gross domestic product would be at risk.
Other raw materials are also essential to the country’s competitiveness, the study notes. The expansion of future technologies such as AI, robotics, and nanotechnology will further increase demand for copper, lithium, and cobalt, among others.
It is no coincidence that the EU has classified numerous raw materials as critical and strategic for its economy and dedicated an entire law to securing their supply. Reducing dependency on imports has moved high up the political agenda of the bloc—yet industry representatives have repeatedly called for faster implementation and greater funding.
Securing Raw Material Supply Requires Cross-Sector Collaboration
The McKinsey authors echo this sentiment. Strengthening raw material security, they write, requires more collaboration—across industry, academia, and finance. They propose several measures, including joint raw material purchases to increase the market power of German buyers—a mechanism recently initiated by the EU (as we reported).
The report also recommends building strategic reserves at the national or European level and expanding recycling. Joint ventures between buyers or government institutions and raw material producers could reduce uncertainty and risk on both sides. More effective, though significantly more complex, would be direct investment in raw material projects. Because of the high capital requirements, this would only be feasible for very large companies, entire countries, or the EU as a whole.
The authors also suggest establishing a German or European agency for raw material security, similar to Japan’s Oil, Gas and Metals National Corporation (JOGMEC). For more than 20 years, JOGMEC has supported domestic companies financially, technologically, and strategically in securing access to resources. Japan is generally regarded as a role model for supply chain resilience and is often cited as a reference point for similar legislation in Europe (as previously reported).
More on Potential Supply Disruptions in Critical Raw Materials: The U.S. Geological Survey recently calculated the multibillion-dollar consequences that supply stoppages of certain raw materials could have for the domestic economy. In a study, researchers focused specifically on the technology metals gallium and germanium—exports of which China restricted more than two years ago. By the end of 2024, shipments to the United States were even completely banned.
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