Drone Warfare Drives Critical Mineral Demand
A BMO Capital Markets report links surging military drone production to increased demand for gallium, germanium, and rare earths.
The global surge in military drone production is creating a new and significant source of demand for critical minerals. A recent report from BMO Capital Markets, cited by the National Association of Manufacturers, states that about 15 million drones are expected to be deployed in the Russia-Ukraine war this year alone.
Governments and military alliances have pledged roughly $150 billion over the past two years to develop drone and counter-drone capabilities. This massive investment is directly increasing the need for specific minerals essential to manufacturing these systems.
Key Minerals and Supply Vulnerabilities
The minerals critical to producing military drones include gallium, germanium, and magnetic rare earths. The BMO report warns that this added demand for already difficult-to-obtain commodities creates a serious vulnerability. This problem is acute because markets for gallium, germanium, and heavy rare earths are small and their processing is heavily concentrated in China.
In recent years, Beijing has tightened its already stringent export controls, which has severely disrupted global supply chains. Heavy rare earths are particularly key as they are used in high-performance permanent magnets, especially where magnets must retain their properties at elevated temperatures.
Production Scale and Material Needs
The scale of planned drone manufacturing is substantial. Ukraine intends to produce over 7 million drones in 2026, a significant increase from the 4 million manufactured last year. On the defensive side, NATO pledged in July to spend more than $40 billion over five years on counter-drone training and capabilities. The alliance also plans to increase by fivefold the number of drone operators it trains.
The material requirements for these systems are precise. According to a study by the Center for Strategic & International Studies, small electric drone motors can each require between 5 and 15 grams of neodymium-iron-boron magnets. Counter-drone systems, needed to detect, track, and defeat drones, also require germanium, gallium, and heavy rare earths.
Alternative Sourcing and New Investments
With China dominating processing, nations are seeking alternative sources for these critical minerals. Canada, with its rich mineral deposits, is emerging as one such alternative. The Canadian government could invest up to CA$400 billion through its Canada Growth Fund into a germanium, gallium, and antimony smelting and refining complex in British Columbia.
Mining giant Rio Tinto is also advancing plans. The company intends to start a gallium pilot plant next year at its Complexe Jonquière in Saguenay, Quebec. This facility will use material already present in the bauxite processed by its nearby Vaudreuil alumina refinery.
The National Association of Manufacturers emphasizes the strategic importance of this shift. NAM Director of International Policy Rachel Minogue stated, Securing alternative critical mineral sources and strengthening and expanding America’s critical minerals industry are both crucial to creating secure supply chains for the defense capabilities needed by the U.S. And our allies. The push to establish reliable, non-Chinese supply chains is now a central focus for defense manufacturing planners.
