Europe has rare earths but, for now, it’s at China’s mercy
Workers transport soil containing rare earth elements for export at a port in Lianyungang, China’s Jiangsu province.
China Stringer Network | Reuters
Like the United States, Europe is feeling the pressure to keep China sweet to maintain supplies of rare earth elements vital to strategic industries in the region such as automotive manufacturing, green energy and defense.
Europe is heavily dependent on China for supplies of the world’s 17 rare earth elements and is seeking ways to calm stormy waters on supplies with Beijing as it seeks alternative sources for critical minerals, including in its own backyard.
But it’s a long process, and for now Europe is as vulnerable as other major rare earth consumers, and especially the United States, when it comes to Beijing’s ability to turn off the supply spigot.
Officials from Germany and the Netherlands are in Beijing this week He met with his Chinese counterparts China’s controls on rare earth exports and semiconductor chips make European industries vulnerable to global supply chain disruptions.
China dominates the rare earth market, from mining to refining. Data from the International Energy Agency It shows that China is responsible for 59% of the world’s rare earth mining in 2024, 91% of its refining, and 94% of the manufacturing of permanent magnets, which are widely used in electric vehicles, wind turbines, industrial motors, data centers, and defense systems.
The dominance of China, the world’s single largest supplier of a component critical to many manufacturing, has made “global supply chains in strategic sectors such as energy, automotive, defense and AI data centers vulnerable to potential disruptions.” IEA drew attention.
This potential for disruption came to the fore this year when Beijing announced licensing requirements and later export controls for rare earth materials and technologies in April and October.
These checks were suspended for a year as a result of a trade truce reached between China and the US in October, but have reached major rare earth importers such as the US and EU, which import about 70% of rare earth supplies. and almost all rare earth magnets – All those from China are acutely aware of their vulnerability to geopolitical disruptions.
Obstacles to diversification
Last month, European Commission President Ursula von der Leyen said the bloc “SOURCE“The plan aims to reduce dependence on critical raw materials from China in the short, medium and long term.” He said the bloc could do this by recycling existing raw materials, such as those in batteries, and through joint purchasing to stockpile them.
Von der Leyen also said the EU would increase investment in strategic projects “for the production and processing of critical raw materials here in Europe” and step up work on critical raw materials partnerships with countries such as Ukraine, Australia, Canada, Kazakhstan, Uzbekistan, Chile and Greenland.
“The world we face today rewards speed, not hesitation, because today’s world is unforgiving. And the global economy is completely different from even a few years ago. Europe can no longer do things the same way. We have learned this lesson the hard way, with energy; we will not repeat it with critical materials.” he saidHe refers to the bloc’s dependence on Russian oil and gas before the Ukraine war.
European Commissioner for Economy and Productivity Valdis Dombrovskis told CNBC on Monday that the bloc is working to diversify its rare earth resources, but it will take time.
“I would say there is some positive news, so China suspended the additional export controls announced in October for 12 months, which bought us some time. But I would say it also highlights the need for the EU to diversify its supplies of rare earths and critical minerals, because of many of these rare earth elements, we are more than 90% dependent on Chinese supplies,” Dombrovskis said. he said.
Is the mother of invention necessary?
Europe itself has reserves of rare earth materials located in Turkey, Sweden and Norway, but the problem is that it does not have the operations to extract these materials, let alone refine and process them, unlike China, which has decades of experience, investment and infrastructure fueling its global processing dominance.
Europe is saddled with longer approval processes and environmental standards when it comes to mining, meaning regional plans to develop these rare earth deposits could take years. Public opposition is also a factor that does not shackle China.
A view of the NEO magnetic facility in Narva, a city in northeastern Estonia. A facility that produces rare earth magnets for Europe’s electric vehicle and wind energy sectors.
Xinhua News Agency | Xinhua News Agency | Getty Images
The need to quickly diversify away from China may cause authorities to reduce these barriers, but there are already signs of action. Europe’s first rare earth magnet production facility opens in Estonia in September. Backed by funding from both Canada and the EU, the plant’s raw materials come from Australia and Malaysia.
“There are probably a lot more deposits in Europe, but … there are barriers to getting that online,” Willis Thomas, general counsel at CRU Group, told CNBC.
“But if we’re moving into a world where risks are realized because of trade tensions, I think that will continue to push everyone to build out the supply chain and be a little bit more flexible, but that takes some time and there’s limited expertise.”
What is also worrying for Europe is that failure to control the sources and supply of raw materials could mean that its technological and green targets are undermined.
“Europe’s race towards net zero and digital leadership depends on materials it does not control,” said ESCP European Economics and Public Policy professor Hamed Ghiaie and Nexans analyst Filippo Gorelli. Analysis for the World Economic Forum.
“For decades, Europe has treated raw materials as a commodity issue, not a strategic issue. This indifference is becoming costly,” they added.
“It’s about climate targets and economic resilience. A shortage of rare earths, gallium or germanium could slow down semiconductor production, artificial intelligence development and even wind energy installation. In short, Europe cannot build a green or digital future on supply chains it does not control.”
