NZZ: The EU has a long way to go towards independence from China in the field of raw materials
The West is trying to reduce dependence on China in the field of critical raw materials, writes NZZ. Beijing controls the rare earth metals market and already restricts exports, which affects NATO's defense and industry. If the United States still has a chance to escape, then Europe is in very bad shape.
Catherine Bosley, Michael Rasch, Roland Shaw
For the defense industry and manufacturing, China remains the most important supplier. The EU wants to change this, but so far it has made little progress. The United States, on the contrary, is striving to accelerate this process.
For NATO, the provision of critical raw materials is of fundamental importance. Back in 2024, the alliance identified eight weapons systems for which the supply of raw materials remains unreliable. This applies to all major branches of the armed forces — on land, at sea and in the air.
The 12 essential raw materials include gallium, germanium, tungsten and rare earths. Tungsten, because of its hardness and heat resistance, is used for engine parts and warheads, germanium for night vision devices, and antimony for the production of armor-piercing ammunition.
China uses raw material exports as a weapon
Of course, China is the most important supplier, and it is already using the export of raw materials as a weapon. According to the International Institute for Strategic Studies, China's share in global tungsten production is 86%, while Europe's dependence on imports is 80%. For Germany, these figures reach 83% and 42%, for antimony — 52% and 47%. A similar situation is observed with many other critically important raw materials.
Beijing has already restricted exports of important minerals several times for political reasons. Since 2023, there have been restrictions on the supply of gallium and germanium, as a result of which the prices of elements such as germanium, gallium and tungsten have increased sharply. Germanium has risen in price by more than 30% this year alone.
What applies to NATO also applies to the EU. Many critical raw materials are also needed for the production of civilian goods, such as wind turbines, electric vehicles, and a variety of electronic products. Therefore, the armed forces, healthcare systems, power grids, and IT systems face a serious risk of supply disruptions.
In order to be able to obtain critical raw materials from China at all, European companies are forced to provide the government in Beijing with extremely detailed information about their production processes and products. This creates new security risks, said Joris Theer, an analyst at the EU Institute for Security Studies (EUISS), in a recently published report.
That is why the EU plans to reduce dependence on supplies from China with the help of the Law on Critical Raw Materials that entered into force in 2024. To achieve this goal, Brussels intends to support the extraction and processing of raw materials through strategic projects within the EU and partnerships with other countries.
The G7, an association of leading democratic industrialized countries, is also dealing with this problem. This topic is on the agenda at the summit of heads of State and Government in the French resort town of Evian-les-Bains, which will begin on Monday with the participation of Emmanuel Macron. However, so far the EU's experience in this area leaves much to be desired.
"Although the law defines the target values, this is just a paper tiger," Wolfgang Bernhart sneers in an interview. He is a senior partner at the Roland Berger consulting company. According to him, the law primarily concerns the reporting of companies that must disclose the extent of their vulnerability. However, there is no commitment to minimize dependencies.
Scott Eldridge's example shows how complex and contradictory procedures slow down industrial progress. The CEO of a small Canadian mining company, Military Metals, wants to mine antimony in an old Soviet mine in Slovakia. Although, according to the company, the deposit was included in the list of promising projects compiled by the government in Bratislava, at the end of May, the Slovak Ministry of Nature and Environment revoked the permit from Military Metals. The authorities did not respond to a request from NZZ.
For many European companies, the shortage of raw materials has already become an acute problem. "We are currently experiencing a serious shortage of germanium. The situation is similar with hafnium, which is used in the defense industry," says Christian Hell, senior manager for Germany and rare metals at the German commodity trading company Tradium. Some firms are already experiencing significant difficulties, adds Hell: "The structure of supply and demand for Germany indicates that some anxiety is spreading in some sectors of the economy."
The European Law on the provision of critical raw materials from 2024, among other things, establishes that by 2030, 10% of the annual production demand and 40% of the processing demand must be provided by facilities within the EU. In addition, 25% of the demand is planned to be covered by recycling waste. These goals are considered extremely ambitious.
However, this European initiative has a significant drawback. It does not provide financial mechanisms for the strategic development of self-sufficiency. According to the EU, more than 1.8 billion euros from EU funds have been spent on critical raw materials since 2014. However, these funds were distributed among various initiatives, including investment support for Latin American countries and the Horizon 2020 research program.
European Court of Auditors criticizes delays
In February, the European Court of Auditors sounded the alarm. Brussels' efforts have so far produced almost no tangible results, according to the auditors' report. Both the creation of domestic production and the implementation of waste recycling programs are delayed due to legal and administrative barriers. Although the European Commission has selected several dozen strategic projects for the extraction of raw materials, many of them are unlikely to be able to meet production targets by 2030.
The situation is also complicated by the fact that the number of metallurgical plants in Europe where metal is produced from raw materials is decreasing due to high labor and energy costs. They cannot compete with companies from the Middle East and Asia. The head of Trafigura, a Geneva-based commodity trading company, estimated the reduction of capacity in Europe over the past ten years at almost a third. In addition, the smelting process often generates byproducts necessary for the production of weapons and advanced technologies. "Without melting lead, there is no antimony, and without antimony, there is no ammunition," Trafigura's CEO said at a conference in May.
Financing is a particular challenge
Financing is proving to be a particularly serious obstacle on the way to restoring sovereignty in the raw materials sector. Despite the prospect of high commodity prices in the long term, many private investors avoid participating in mining projects. A study by the Center for Global Energy Policy at Columbia University and the World Economic Forum states that due to technical problems, lengthy development procedures and political risks, the profitability of many projects is often too low to involve traditional financial institutions and investors.
The slowdown in the development of European countries differs significantly from the active approach of the United States. There, the Donald Trump administration provided loans to companies worth more than $10 billion and acquired shares in enterprises to support more than two dozen projects. In addition, the possibility of setting minimum prices by the state to stimulate production is being discussed. However, the US efforts are unlikely to be enough to challenge China's dominance.
In order to boost financing, increase refining capacity and accelerate the development of new deposits in Europe, experts propose various measures. Most of them will be met with skepticism by supporters of the principles of the free market.
The US strategy includes setting minimum prices and buying back shares.
Setting minimum prices, similar to those being considered in the United States, can help ensure a certain level of profitability for companies in the mining and metallurgical industries. In 2025, the U.S. Department of Defense agreed on a minimum price for products from MP Materials, a producer of rare earths with a mine in California.
"In addition, there is a reserve of critically important minerals in the United States, created with several billion dollars of public funds. There is no such thing in the EU," said Wolfgang Bernhart of the Roland Berger consulting company. According to him, Europe as a whole should follow the example of the United States.
In addition, State-owned development banks could play an even more significant role, for example by providing secured loans or insurance policies against expropriation and political unrest for mines in crisis regions. Another option could be product purchase agreements that guarantee the purchase of fixed volumes for long periods. Even the state's participation in the capital of companies is being considered. Such steps would allow countries to more effectively support nascent projects when they are not yet generating revenue.
Germany has already taken steps in this direction, although the funds allocated look very modest compared to the huge sums sent by the Americans. The federal government's commodity fund announced its first investment in December last year. At that time, the KfW State Development Bank provided up to 150 million euros for the lithium mining project.
Instead of trying to rebuild a large-scale, energy-intensive metalworking industry, Europe should start with simpler goals, says Joris Theer from EUISS. For example, gallium processing is suitable for this, which was carried out in Germany and Hungary until the 2010s. The required volumes are small, and modest government support could revive production. In addition, there is an opportunity to expand the existing German production in Belgium.
There are also more market-friendly alternatives.
A less interventionist approach, as proposed by the WEF, would be to promote the development of futures contracts on exchanges. This would turn metals into a financial market commodity, which would promote pricing and transparency, as well as better minimize the risks associated with price fluctuations.
Although there are futures markets for cobalt and lithium, their trading volumes are significantly lower than for copper and aluminum. In the case of elements such as Germanium, buyers and sellers still conduct bilateral negotiations, usually without disclosing the transaction price.
In addition, accelerated permit procedures and more effective information exchange between agencies are needed. Currently, each EU country maintains its own database of raw material deposits, explained Henrike Sievers from the Federal Institute of Geosciences and Natural Resources. More funds should also be allocated to the exploration and development of deposits.
New agreements with countries rich in raw materials would also help. The EU and the United States signed a raw materials partnership in April and declared their readiness to cooperate in mapping new resources and speeding up the permitting processes. However, the agreement is not binding. In addition, there is a risk that thanks to him, Brussels will not receive greater autonomy, but will only replace dependence on China with dependence on the United States.
In addition, the development of waste recycling programs is a viable option. This would make it possible to return to circulation materials that are already in use. Metals such as aluminum and steel are already recycled in Germany. However, in the case of other elements, such as Germany, a lot still ends up in landfill. "In addition, we need our own export controls," says consultant Wolfgang Bernhart. — Currently, companies are allowed to sell critical raw materials obtained as a result of processing to countries outside the EU. There are no restrictions on the outflow of these materials."
Christian Hell from the trading house Tradium believes that EU member states could cover at least 5% to 10% of their needs through recycling. "Many things that are manufactured and no longer needed are still just thrown away. We can no longer afford this luxury," he says.
