Europe is under pressure, as are the United States, to maintain good relations with China in order to secure the supply of rare earth elements, which are vital for strategic sectors of its economy, such as car production, green energy, and defense.
Europe is largely dependent on China for the supply of the 17 rare earth elements that exist in the world and has sought ways to calm the "troubled waters" with Beijing regarding the supply of these materials, while simultaneously trying to find alternative sources for the critical metals, even within its own borders.
However, this process takes time, and for now, Europe remains vulnerable, as do other major consumers of rare earth elements, especially the US, regarding Beijing's ability to "turn off the tap" of supply.
Officials from Germany and the Netherlands are in Beijing this week for talks with their Chinese counterparts regarding the restrictions China imposes on the export of rare earth elements and semiconductors, which have made European industries vulnerable to disruptions in global supply chains.
Europe's inability to control the sources and supply of raw materials may mean that its technological and green ambitions suffer. "Europe cannot build a green or digital future on supply chains it does not control," experts warn.
China's dominance
China dominates the rare earth elements market from mining to refining, with data from the International Energy Agency (IEA) showing that in 2024, China was responsible for 59% of global rare earth mining, 91% of refining, and 94% of the production of permanent magnets used in electric vehicles, wind turbines, industrial motors, data centers, and defense systems.
China's dominance has made the "global supply chains in strategic sectors – such as energy, the automotive industry, defense, and data centers for artificial intelligence – vulnerable to potential disruptions," as the IEA notes.
This possibility of disruption came to the fore this year when, in April and October, Beijing announced licensing requirements and later restrictions on the export of rare earth elements and technologies.
These restrictions were suspended for one year due to the trade truce agreement reached in October between China and the US. However, the main importers of rare earth elements, such as the US and the EU, which import about 70% of their rare earth elements – and almost all of their rare earth magnets – from China, are fully aware of their vulnerability to geopolitical disruptions.
Obstacles to supplier diversification
A month ago, European Commission President Ursula von der Leyen announced the "RESourceEU" plan, which aims to reduce dependency on critical raw materials from China "in the short, medium, and long term." As she stated, the European Union can achieve this by recycling existing raw materials, such as those found in batteries, and through joint purchases for reserves.
Von der Leyen also stressed that the EU will enhance investments in strategic projects "for the production and processing of critical raw materials in Europe" and will accelerate its cooperation with countries like Ukraine, Australia, Canada, Kazakhstan, Uzbekistan, Chile, and Greenland.
Valdis Dombrovskis, European Commissioner for Economy and Productivity, told CNBC on Monday that the EU is working to diversify rare earth supplies, but this process will take time. "I would say there is some positive development, as China has suspended these additional export restrictions, which were announced in October, for 12 months, giving us a little time. But I would also say that this emphasizes the need for the EU to diversify supplies of rare earth elements and critical metals, because for many of these rare earth elements, we depend more than 90% on China," Dombrovskis stated.
Innovation is necessary
Europe has rare earth reserves, with deposits located in Turkey, Sweden, and Norway, but the problem is that it lacks the appropriate infrastructure for the mining, refining, and processing of these materials—unlike China, which has decades of experience, investment, and infrastructure that have allowed it to dominate global processing.
Europe also faces greater difficulties due to the long approval procedures and environmental standards required for mining, which means that any regional plan to develop these rare earth deposits could take years. Public opposition is also a factor that does not restrict China.
However, the need for rapid diversification from China may lead to a loosening of these obstacles, and there are already signs of action. In September, the first rare earth magnet production plant in Europe opened in Estonia, supported by funding from both Canada and the EU. The plant's raw materials come from Australia and Malaysia.
www.bankingnews.gr
Σχόλια αναγνωστών