Drone warfare adds pressure to Europe’s critical mineral supply chains
Expanding drone and counter-drone programmes are increasing demand for materials also used by civilian industries. Projects in Europe, Canada and Brazil aim to diversify supplies, but much of the additional capacity remains under development.
The expansion of drone warfare is adding another source of demand for gallium, germanium and rare-earth magnets, linking Europe’s military production plans to mineral supply chains concentrated in China.
BMO Capital Markets estimates that around 15 million drones will be deployed in the Russia–Ukraine war in 2026, with their germanium consumption equivalent to roughly 4% of global demand. The bank also identifies approximately €129.4 billion in drone and counter-drone funding pledges since 2025, only around half of which appears firmly committed. These figures do not represent spending already completed.
Ukraine’s manufacturing targets illustrate the change in scale. Its defence ministry says the country aims to produce more than seven million drones in 2026, compared with four million in 2025.
The response extends beyond producing aircraft. In July, NATO allies announced plans to invest the equivalent of more than €34.5 billion over five years in counter-drone capabilities. The alliance is also developing a marketplace to improve access to these technologies and aims to increase fivefold the number of drone operators trained by the end of 2027.
For mineral suppliers, this creates demand from both the aircraft and the systems designed to detect and neutralise them. Gallium is used in high-performance semiconductors, germanium in infrared and optical systems, and rare-earth magnets in electric motors.
These materials also serve telecommunications, electronics, electric vehicles and wind power. Defence procurement therefore draws on supply chains that support several civilian industries.
The concentration of supply is particularly pronounced in processing. A US Geological Survey study published in June, using 2023 data, put China’s share of global primary refined gallium production at 98%. Access to mineral deposits elsewhere does not automatically provide an alternative source of refined material.
The cost implications are visible in the International Energy Agency’s 2026 outlook. It reports European prices for gallium, dysprosium and terbium at around five times Chinese domestic prices, while germanium prices were almost three times higher. The agency identifies export controls as a factor behind these regional differences.
For European manufacturers, those gaps suggest that diversification involves more than securing physical supplies: the price and reliability of alternative sources will also affect production costs.
One response is taking shape between Estonia and France. Neo Performance Materials commissioned a small-scale heavy rare-earth separation line at its Silmet facility in Estonia in April, producing initial separated dysprosium and terbium solutions.
On August 31, Neo announced binding terms for a partnership with France’s Carester. The arrangement is intended to supply heavy rare-earth oxides to Neo’s European magnet operations while returning manufacturing scrap for recycling. Carester’s Caremag separation and recycling facility in Lacq remains under construction.
Canada is pursuing additional processing capacity. Teck’s agreement with public-sector partners provides a framework for potential investment of up to approximately €528 million at its Trail complex in British Columbia, including a possible contribution of up to €248.5 million from Canada Growth Fund.
The initiative could double existing germanium and antimony capacity and introduce gallium production. It remains a proposed expansion, not additional output already available.
Rio Tinto is developing a separate route to gallium through its alumina refining operations in Quebec. A pilot plant is expected to operate in 2027. The company is also planning a demonstration facility capable of producing up to four tonnes annually, with a possible subsequent commercial operation reaching 40 tonnes.
Latin America forms another part of the diversification effort. Aclara Resources targets a start-up in the second half of 2028 for its Carina rare-earth project in Brazil, followed by a production ramp-up through 2029. Its planned supply chain would send an intermediate rare-earth product to processing facilities in the United States.
Together, these projects illustrate the different stages required to build alternative supplies: extraction, separation, refining, recycling and component manufacturing. Announcing investment at one stage does not immediately create capacity across the others.
For Europe, the industrial challenge is therefore to align defence procurement with the development of material suppliers. Larger drone orders can support investment, but reliable delivery will also depend on financing, construction, technical qualification and the ability to sustain commercial production.
