CRITICAL METALSThe EU's Risky Dependency on Critical Chinese Metals

By Insa Wrede

Published 20 April 2022

The EU needs critical metals and rare earths to succeed in its energy transition and digitization drive. But even as the EU tries hard to cut its energy supplies from Russia, the bloc is also heavily dependent on China when it comes to the industrial metals and rare earths.

Even as the EU tries hard to cut its energy supplies from Russia, the bloc is also heavily dependent on China when it comes to the industrial metals and rare earths that the bloc needs for wind turbines, electric vehicles, solar cells and semiconductors.

Given the increased speed of digitization and energy transition, demand for such raw materials is bound to rise further, but mining is concentrated in only a handful of regions in the world.

This means that in the future China could cause a big headache for the European Union. The Asian country exports many raw materials that are indispensable for future-oriented industries. On top of that, China plays a pivotal role not just in mining, but also in the processing of materials, says Siyamend Al Barazi of the German Mineral Resources Agency (DERA).

China’s De Facto Monopoly
The European Union’s dependency on metal imports is somewhere between 75% and 100% depending on the metal. Of the 30 raw materials that the EU classifies as critical, 19 are predominantly imported from China. The list includes magnesium, rare earths and bismuth where China has a de facto monopoly, providing up to 98% of the supplies needed in the EU.

This dependency could even increase in the future. The EU reckons that cobalt demand alone will rise fivefold by 2030. Lithium demand is expected to increase 18-fold by 2030 and 60-fold by 2050 on the back of the bloc’s e-mobility campaign.

Political Leverage
Back in 2010, some analysts said China was using its raw materials monopoly to exert political pressure when Beijing limited the export of rare earths, seeing prices jump. The move was later looked into by the World Trade Organization and China had to reverse its export cuts.

Europeans including Germans gained more trust in China actually willing to play by the rules,” said Raimund Bleischwitz from the Leibniz Centre for Tropical Marine Research.

There’s no guarantee, though, that Europe’s demand will be fully covered in the future. A March report by the German business daily Handelsblatt said experts in the Chinese Ministry of Industry and Information Technology debated in January 2021 whether to stop the export of rare earths to the US.

Europe shouldn’t be surprised if China reduces raw materials exports. In its latest five-year plan, Beijing made it clear that exports would be cut to satisfy growing domestic demand.