US risks provoking a rise in prices for critical minerals

American defense companies have warned that a large-scale government program to create strategic reserves of critical minerals could lead to higher prices for raw materials and an increase in shortages of materials needed for the production of weapons and high-tech products.

Financial Times reports this, citing a report by the Aerospace Industries Association of America (AIA), published on October 8.

Industry representatives are concerned that the US government will begin competing with industrial enterprises for limited volumes of rare earth elements and other strategic metals.

As a result, purchases of raw materials for state reserves could trigger additional price increases and increase instability in the global market.

US is creating a $12 billion strategic minerals reserve

The main concerns of defense companies are related to Project Vault, introduced by the Export-Import Bank in February 2026.

The initiative provides for the formation of a strategic stockpile of critical minerals totaling about 12 billion dollars.

Unlike traditional government defense reserves, Project Vault is primarily designed to support American industrial enterprises.

It is expected that companies will be able to receive necessary materials from reserves in case of supply disruptions on international markets.

The program should reduce the dependence of American industry on foreign suppliers, especially China, which holds a dominant position in the extraction and processing of many critical minerals.

However, defense sector representatives warn that large-scale government purchases could create new problems before the reserve begins to serve its protective function.

Defense companies fear rising prices

In the published report, the Aerospace Industries Association urged the government to act cautiously so as not to disrupt the market balance.

According to industry participants, Project Vault could begin to compete with private producers for the same materials in a situation where global supplies are already limited.

This could lead to higher costs for raw materials, increased price volatility, and additional difficulties for companies purchasing metals for current production.

The association includes major enterprises in the aerospace and defense industries, including Palantir Technologies and BAE Systems.

The organization called on US authorities to clarify the mechanism of Project Vault and eliminate producers' concerns before large-scale purchases begin.

This issue is particularly important for enterprises producing military equipment, aviation equipment, missiles, electronics, and control systems.

Chinese restrictions have increased raw material shortages

The situation in the critical minerals market was complicated by the trade confrontation between Washington and Beijing.

China imposed restrictions on the export of a number of metals and rare earth elements used in the high-tech and defense industries.

This led to a reduction in available supplies and an increase in the cost of certain materials.

Among the most important resources for the defense sector are tungsten and rare earth elements.

Tungsten is used due to its high hardness and resistance to extreme temperatures. It is necessary for the production of special alloys, components of weapons, and industrial equipment.

Rare earth elements are used in the production of powerful permanent magnets used in electric motors, aviation systems, radars, and precision-guided weapons.

Since a significant part of the world's processing of such materials is concentrated in China, it is difficult for American producers to quickly find alternative suppliers.

Enterprises already entering into long-term contracts

Growing competition for strategic raw materials is reflected in new agreements between mining companies and suppliers.

According to Financial Times, Spanish company Abenojar Tungsten has signed a deal to sell all of the tungsten its mine produces during the first ten years of operation.

The buyer is the international trading company Traxys, which will supply the material, including for the Project Vault program.

Such long-term agreements allow the American side to secure access to necessary resources in advance.

However, they simultaneously reduce the volumes of raw materials that could remain available to other buyers on the open market.

In conditions of limited supply, this creates additional risks for enterprises without their own long-term contracts.

Defense industry requests delay in restrictions on Chinese magnets

In addition to concerns about government purchases, American manufacturers warned of difficulties in meeting new requirements regarding the origin of components.

From January 1, 2027, restrictions on the use of Chinese-origin rare earth magnets in American defense products are to come into force.

However, the Aerospace Industries Association believes that enterprises may need more time to switch to alternative suppliers.

The problem lies not only in the availability of raw materials, but also in insufficient processing capacities and manufacturing of specialized components outside China.

In addition, new suppliers must undergo lengthy quality inspection and certification procedures for defense applications.

In this regard, the association proposed maintaining the possibility of temporary exemptions from the requirements after January 1, 2027.

Industry representatives warn that without a clear mechanism for granting such exemptions, enterprises may face production delays.

Export-Import Bank rejects manufacturer concerns

The Export-Import Bank disagreed with criticism of the Project Vault program.

Bank representatives told Financial Times that the project was conceived as a mechanism to protect American industry from sudden supply disruptions.

According to them, the strategic reserve should help manufacturing enterprises survive crises in raw materials markets, not compete with them for limited resources.

The Pentagon declined to comment on the defense industry's concerns.

Thus, US authorities expect to strengthen the country's raw material security through state reserves, while manufacturers warn of the risks of materials becoming more expensive at the stage of accumulation.

The issue takes on particular importance amid US efforts to expand defense production while reducing dependence on Chinese suppliers.

Based on materials from: Financial Times, Aerospace Industries Association, AIA report.