Germanium supply crunch: Leonardo DRS leans on safety stock as prices surge

Ge, US

Leonardo DRS faces a Germanium supply crunch that threatens infrared sensor deliveries. The firm relies on safety stock as non-China supply tightens and prices rise. This Germanium supply crunch also forces contingency planning across sourcing, timelines, and design choices.

Tight supply squeezes defense optics schedules

Germanium is essential for cooled and uncooled infrared optics. Therefore, the Germanium supply crunch raises lead times and project risk. Leonardo DRS expects flows to improve in the second half. However, any delay could slow sensor shipments to key defense programs.

Substitution and diversification remain limited near term

Leonardo DRS is qualifying non-China sources to ease the Germanium supply crunch. Meanwhile, engineers assess substitutes, but redesigns need months and careful testing. As a result, germanium remains the primary choice for performance-critical thermal imaging.

Global context amplifies procurement risk. Export controls and rising telecom glass demand constrain germanium dioxide. Prices firm as inventories thin outside China. Therefore, buyers compete for scarce units, tightening spreads and stressing budgets.

Program managers prioritize allocation to mission-critical lines. Leonardo DRS balances backlog, cost, and delivery penalties. In parallel, teams explore recycling loops and long-term take-or-pay contracts. These steps could stabilize future supply and pricing exposure.

The Metalnomist Commentary

Germanium remains a chokepoint for Western defense optics until diversified refining scales. Multi-year offtakes, closed-loop recycling, and faster qualification of alternative refineries look vital. Watch second-half flows; a miss could ripple through FY25 delivery schedules.