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Europe’s race for raw materials amidst global shifts in supply chains

With the rising demands of energy transition, electromobility, and digitalization, the global appetite for minerals and metals is escalating. Germany, a crucial business hub in the European Union, is acutely aware of its dependence on a consistent supply of raw materials, vital for sectors like automotive, mechanical engineering, and chemicals. The intricacies of metal supply chains make them both complex and pivotal; any shortage in raw materials can jeopardize the production of essential goods.

Currently, only a fraction of raw materials used in Germany and the broader European industrial sector is sourced domestically. The reliance on imports from other countries is high, and achieving complete self-sufficiency in raw material supply is deemed impractical. The German Mineral Resources Agency reports that in 2022, Germany imported metals worth €121.7 billion, and this figure is on the rise.

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The geopolitical dimension of how Germany structures its raw material supply relationships is crucial. China has emerged as a central hub for global metal supply chains over the past two decades. The People’s Republic is a major supplier of various mineral raw materials essential for Europe. The European Union, for instance, sources almost 100 percent of its rare earths from China, indicating high dependencies.

The European Commission is taking steps to address these challenges through the Critical Raw Materials Act (CRMA), proposed in March 2023. The CRMA aims to strengthen domestic mining and processing within the EU, expand recycling capacities, and diversify imports of critical raw materials. The EU also seeks to establish new partnerships and reduce dependency on individual countries.

The geopolitical competition for raw materials is intensifying globally. The United States, through initiatives like the Inflation Reduction Act and the Minerals Security Partnership (MSP), is actively securing its raw material supply chains. China continues to exert its influence, supporting industrialization projects in Africa and bolstering its role in solar industry projects.

Even Saudi Arabia is making significant investments in mineral resource development as part of its “Vision 2030.” Resource-rich countries in the Global South recognize the geopolitical competition as an opportunity to move beyond being mere suppliers and establish stages of industrial production within their borders.

In response, the EU has been forging strategic raw materials partnerships with various countries, including Argentina, Canada, Chile, the Democratic Republic of the Congo, Greenland, Kazakhstan, Namibia, Ukraine, and Zambia. However, with the global race for raw materials partnerships gaining momentum, the EU must navigate the complexities of international cooperation and ensure a coordinated approach among member states.

While financial resources are essential in this race, strategic foreign policy decisions are equally crucial. The EU needs to engage in meaningful dialogues with potential raw material partners, considering their economic and industrial policy interests. The competition for raw materials is not just about money; it requires a nuanced and proactive foreign policy approach to secure Europe’s access to essential resources.

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