While the European Union and the UK are trying to shake off dependence on Russian oil and coal in the wake of Russia’s invasion of Ukraine, Europe is also taking steps to reduce its dependence on China for critical minerals and rare earth elements that are crucial to the energy transition.
China is the dominant player on the markets for the materials used in solar panels, batteries, and magnets. European countries have recently ramped up efforts to establish local supply chains and diversify imports away from one dominant supplier, especially if this supplier is Russian ally China.
The EU has created the European Raw Materials Alliance (ERMA), which aims to make Europe economically more resilient by diversifying its supply chains, creating jobs, and attracting investments to the raw materials value chain. By 2030, ERMA’s activities are expected to increase the production of raw and advanced materials and address Circular Economy by boosting the recovery and recycling of Critical Raw Materials.
The UK, for its part, unveiled last month a Critical Minerals Strategy, which sets out a plan to secure the UK supply chains, by boosting domestic capability, attracting investment, and playing a leading role in solving global challenges with the UK’s international partners.
According to the European Commission, China provides 98% of the EU’s supply of rare earth elements (REE).
“The risks associated with the concentration of production are in many cases compounded by low substitution and low recycling rates,” the Commission says.
China could reduce exports of critical materials, as authorities said in the latest five-year plan that the country would cut overseas shipments to meet the rise in demand domestically, Deutsche Welle noted earlier this year.
Germany’s economy, Europe’s biggest, became more dependent on China during the first half of 2022, according to a study by the German Economic Institute (IW) seen by Reuters.
“The German economy is much more dependent on China than the other way round,” Juergen Matthes, who authored the study, told Reuters.
By Charles Kennedy for Oilprice.com
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