The recent political consensus on the European Critical Raw Materials Act (CRMA) marks a significant step towards a common raw materials policy within the European Union (EU). Against the backdrop of increasing geopolitical tensions, the EU aims to bolster its “strategic autonomy” within its raw material supply chains. To achieve this goal, it is essential for the EU and its member states to enhance collaboration with mineral-rich third countries. The current geopolitical environment will require a concerted effort on the part of the EU with respect to its raw material diplomacy, as only through such effective engagement will the EU be able to diplomatically and programmatically implement raw material partnerships that appeal to third countries.
Minerals are the basis of almost all industrial value chains, and therefore, they are of great strategic importance to the European economy. As the EU needs to import the vast majority of these raw materials, it currently faces tremendous challenges stemming from, on the one hand, increasing demand driven by the need to produce green and digital technologies, and on the other hand, limited non-EU suppliers of these raw materials, which has resulted in pronounced dependencies on a select few, particularly China.
In Europe, the Russian invasion of Ukraine and the resultant disruption to Russian gas supply has sharpened awareness of risks associated with supply chain dependencies. There is growing concern that trade may increasingly be used as political leverage. Against this backdrop, the EU is aiming to strengthen its economic “strategic autonomy”. Consequently, the European Green Deal, which was implemented in 2021, foresees a dual transformation, in that the EU will become a green and digital economic hub while simultaneously improving its economic resilience through the reduction of critical (import) dependencies in strategic sectors, including the raw materials sector.
The EU’s CRMA: creating resilient mineral supply chains
In March 2023, the European Commission introduced a proposal for the Critical Raw Materials Act (CRMA), which aims to ensure that European industries have a resilient and sustainable supply of critical raw materials. The Act received broad political backing and will soon come into force. The introduction of the CRMA strengthens the EU’s role in raw material policy – a domain that had previously primarily fallen under the purview of member states. Under the Act, the European Commission will now lead the European Critical Raw Materials Board (CRM-Board), which will oversee and coordinate the implementation of the CRMA in cooperation with member state representatives. Engagement will be based on the list of critical raw materials that is set to be updated every three years. The last update in 2023 identified 34 critical raw materials. The Act focuses on a subgroup of strategic raw materials (currently numbering 17) that are of significant importance for the EU and exhibit very high supply risks. Concrete targets for 2030 include firstly, increasing Europe’s capacity to mine, process, and recycle these strategic raw materials, and secondly, diversifying the sources from which they are imported.
Expanding European capacities: The 2030 target is tight, as the time between exploration to operation of mining projects averages over 15 years. The creation and expansion of processing and recycling capacities will also require enormous effort. In this context, the promotion of strategic projects will be all the more important; they will be selected by the CRM-Board and are planned to benefit from accelerated approvals as well as financing opportunities. It should be noted that the CRMA itself does not contain any new direct investments, therefore industry representatives have expressed concerns about the feasibility of implementing a sufficient number of new projects. Still, even if European capacities are rapidly expanded, the EU will never achieve complete autonomy because many critical raw material deposits are absent or insufficient in the EU, such as nickel and cobalt – which are essential for the production of batteries.
Diversifying imports: Third countries will remain the EU’s primary source of minerals for the foreseeable future. Therefore, diversifying sources of supply is a central objective of the EU’s raw material strategy. The CRMA stipulates that no more than 65 percent of any one strategic raw material should be imported from any single third country. This is particularly significant in view of China’s dominant position in transnational supply chains. China is the EU’s main supplier of most raw mineral materials, including over 90 percent of its rare earths, gallium, and magnesium. When it comes to processing, European dependency is particularly pronounced. For example, China currently controls over 50 percent of the global capacity to produce refined lithium and cobalt.
To achieve its diversification goals, the EU must intensify its cooperation with mineral-rich countries. To this end, the CRMA envisages the establishment of strategic partnerships related to raw materials. Since 2021, the European Commission has already initiated twelve such partnerships and counting. In addition to industrialised mining countries such as Canada, these partners also include numerous countries from the so-called “Global South”.
Most of these partnerships are laid out in concise Memoranda of Understanding (MoUs) founded on the mutual interest to cooperate in the raw material sector. Nonetheless, these collaborations now require further concrete delineation. To this end, the EU plans to develop joint roadmaps that provide partner countries the opportunity to contribute their own priorities and to actively participate in shaping the agenda, thus creating a win-win situation. This will be quite ambitious considering that resource-rich countries are making concrete demands for domestic value creation.
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About the author:
Meike Schulze is an associate at SWP for the project International “Raw Material Cooperation”.