The EU's Risky Dependency on Critical Chinese Metals
China hopes to become climate-neutral by 2060 and needs more critical raw materials for itself. In a strategic move, China has already secured vital imports from Africa and elsewhere through large-scale investments and long-term contracts.
Instead of exporting raw materials, China aims to become a global technology leader in key industries.
Germany in a Bind
Germany has been trying for years to diversify its raw materials imports. Rare earths are now being imported not only from China, but Brazil too. In 2010, it set up the German Mineral Resources Agency, which constantly monitors the availability of resources worldwide.
“We’ve been pointing to a higher market concentration for 10 years now, said DERA’s Al Barazi.
“There’s a kind of attention cycle among industry leaders and politicians,” added Bleischwitz. “The topic always comes up when prices rise as they did over the last 18 months — action plans are hammered out, but when the prices start falling again, the topic falls from view and nothing is done anymore.”
DERA research shows that Germany continues to rely largely on Chinese imports, including raw materials and processed goods.
China seems willing to embark on more sustainable production methods and do more for environmental protection. Domestic inspections in the magnesium-producing industry toward the end of last year resulted in the shutting down of a number of plants across China. As a result, the price per ton of magnesium jumped from $2,000 to $10,000 (€1,850 to €9,250).
According to Al Barazi, the same thing happened in the silicon-producing industry in China, leading to reduced overall output.
Increased Mining in Europe?
The autumn of 2020 saw the founding of the European Raw Materials Alliance, which is meant to enhance supply security and diversify imports for Europe’s industries. In addition, the EU aims to increase its own mining and processing activities.
“There have been endeavors for years in the EU to support domestic mining activities,” said Al Barazi. Some of the critical materials can indeed be found in Europe, but many countries don’t want any dirty mining activities in their vicinity.
Spain just experienced public protests against plans to open a lithium mine in Estremadura. Such protests also occurred in Serbia and Portugal.
There are lithium deposits in Germany too. Following a lengthy period of looking for investors, lithium mining is slated to start in the German state of Saxony in 2025.
The financing of new mining projects remains a huge issue, says Al Barazi, pointing to a lack of venture capital. If you just consider the price of the raw materials in question, European mining is not competitive, given that China for instance subsidized mining heavily in the 1990s and has laxer environmental requirements, leading to lower prices.
Recycling Part of the Solution?
One thing’s for sure: Europe cannot fully meet its demand with mines of its own. Part of the solution could be to reuse more materials through more efficient recycling procedures and focus more on a circular economy. But there are limits to this.
As long as overall demand keeps rising steadily, recycling can only mitigate the problem in Germany, according to Peter Buchholz who runs DERA. “Industry can only recycle the stuff that’s actually available,” he noted. “Some 40 years ago, copper demand amounted to 10 million tons a year, today it’s over 20 million tons.”
In order to absorb the shock of possible export cuts, many EU nations, the US and Japan have tried to accumulate considerable reserves of natural resources.
When debating the risks of Germany’s dependency on China, “you must not forget that China is also dependent on imports from Germany,” said Bleischwitz. “Before the COVID-19 pandemic, China actually imported more raw materials from Europe than it exported, for instance forestry products and processed metals.”
This at least goes to show there’s a mutual dependency.
Insa Wrede is editor at DW.This article is published courtesy of Deutsche Welle (DW).
