Which defence technologies or systems currently generate the highest demand for critical materials such as rare earths, PGMs, and minor metals?

Critical materials are used across all defence technologies, equipment, and systems. They are used in varying ways depending on their properties, but it is important to note that critical materials demand from defence applications is increasing rapidly due to the strategic shifts in modern conflict situations, where aerial systems, and particularly unmanned technologies, such as missiles, drones, and anti-airborne weapon technology have become more prevalent.

Rare earths are mostly used in motors for flight functions, such as in jets or drones. However, they are also used in a wide range of sensor technology, lenses, LED displays, and laser guidance systems. Even lithium-ion batteries get exposure to military applications through their use to power drones. PGMs are notable because they are used for both their physical and communications/electronic properties.

Ruthenium is a particularly interesting one, used for its heat-resistant properties, which is becoming increasingly important in defence equipment with more electronics and aerodynamic drag that need to be managed, and as a coating to reduce radar cross-section by scattering or absorbing electromagnetic waves. Finally, all things semiconductor-related are also key, not only the materials contained in them, but also the materials required in the manufacturing process.

Speaking more broadly, in what ways has the rise of economic nationalism and the trend toward deglobalization reshaped defence supply chain strategies, particularly regarding critical materials sourcing and security? And how exposed is the West to critical material supply disruptions?

It has only been in the last four years, since the Russia-Ukraine conflict, that the trend toward deglobalization has really impacted defence strategy when it comes to critical material supply chains. Prior to this, the focus largely centred around the energy transition. China’s export restrictions since 2023 (to varying degrees) for critical materials such as gallium, germanium, antimony, rare earths, tungsten, graphite, molybdenum, bismuth, indium, and tellurium also added fuel to the fire.

Since 2022, we have seen defence spending increase in earnest, but to date, the geographical sourcing of defence equipment and technology has largely remained the same, mainly because it takes many years to build up the manufacturing capabilities and approve supply chains for this highly sensitive sector. The critical materials supply chain, however, has had to face some adjustments.

Titanium is a notable case study. Russia had previously been the largest supplier of aerospace-grade titanium to the world. As more countries announced sanctions against Russian materials, and many companies also chose to self-sanction against buying Russian material, particularly for defence applications, prices increased, and there was a struggle to secure sufficient titanium. The criticality of the supply chain was also quickly highlighted by Airbus and Boeing being exempt from sanctions.

However, our conversations at this year’s Paris Air Show with parts manufacturers and distributors suggest that this challenge has largely been solved as additional producers have come into the market. Nevertheless, for highly stringent aerospace applications, the certification process for new materials and supply chains can take up to 10 years before the material finds its way into an active passenger aircraft.

Trade data confirms that Kazakhstan and Saudi Arabia became more prominent in the sponge export market in 2024, in addition to Japan, which had always been a leading supplier as well. The USA dominated titanium metal exports earlier this year. The trade data also shows that South Korea is becoming more prominent as an importer, which also signals shifting flows and ambitions in the aerospace and defence industry.

There are probably two key takeaways from the titanium market:

1) Supply disruptions do get solved over time. Supply constraints are very rarely a structural, permanent change in the market. The quickest response will be expansions from existing producers, but emerging players can also come into the market after two to three years.

2) Despite policymakers’ desire to build domestic capacity, the reality is that critical materials and defence will always be a global business, particularly as one moves further along the value chain. Upstream is all about geology, midstream requires energy and logistics, and downstream is about technology and efficiency. No one country can do all of it, for every critical material or defence application. So partnerships and cooperation remain key to securing critical materials.

The list of materials NATO deems strategic is growing, with China being the leading producer of more than half of them.

As global supply chains realign, which countries or regions are positioning themselves as potential alternative sources or processors of critical materials for defence use?

At the latest G7 meeting in mid-June 2025, the countries endorsed the development of critical minerals supply chains, with a particular push for development financial institutions (DFIs) and export credit agencies (ECAs) to collaborate more closely with this strategy. However, there was also a recognition in the press release that additional collaboration outside this small group of nations would be required, including with Australia, India, South Korea, and Africa.

The key to the question is, of course, permitting and processing.

Global resources and reserves are fairly well mapped, for the most part, and many projects have been known about for decades. But the regulatory hurdles, such as permitting, which are driven by government policy, have long been an impediment to financing these projects.

Of course, our natural resources should be extracted and processed responsibly and sustainably, which adds complexity for policymakers as the geology, flowsheets, and logistics differ from project to project. There is no one-size-fits-all policy that makes sense for all projects, but this does slow the development timeline.

The second part of the puzzle is processing the raw materials into advanced or alloyed materials that are suitable for use in technological and defence applications, where capacity also needs to be expanded to meet future needs. There is actually a very limited number of manufacturers who have the experience and approvals to feed defence supply chains today.

But we are hearing from producers, from other areas in the world such as Central Asia and South America, who want to enter this supply chain, particularly those who maybe already produce commodity- or industrial-grade materials and are looking to upgrade their capabilities.

Project Blue's Consulting Division

Our Consulting division support market participants across all stages of critical material supply chains with their strategic and investment decisions - speak to our experts to learn more.

10

3

18

27

11

4

4

19

20