Critical raw materials, such as cobalt or germanium, have two things in common: They are all rare, but also vital for the production of everyday items such as smartphones or solar panels.
The European Union has identified 30 of these resources – for which there is currently no substitute – as crucial for the defense and renewable energy sectors, as well as in the manufacture of robotics, drones and batteries. The world production of these critical raw materials barely reaches a few thousand tons per year. And it is controlled by a handful of countries.
Where do all these minerals come from?
For example, South Africa has platinum and vanadium reserves, the Democratic Republic of the Congo is home to cobalt deposits, and the United States mines beryllium. China, for its part, has mining access to two-thirds of the different 30 critical raw materials, including antimony, barite and elements known as rare earths.
The uneven geographical distribution of these raw materials is reflected in the market share. China is one of the top three suppliers for many of the items, well ahead of the United States and Russia. This dominance is due in part to existing sites in China itself, but also to deliberate planning.
China’s plan to dominate the markets
“China has strategically developed mining and processing. … Today it is the Shanghai Metal Exchange, not the London Metal Exchange, that is important,” says Hanns Günther Hilpert, Director of the Asia Research Division. of the German study center SWP.
“The country has built a know-how unique in the world, “says Hilpert.” Even when they are extracted from other alternative deposits, most of the processing is done in China before they are exported again. “This makes China the largest producer of critical raw materials, but also in the main importer of those mined elsewhere And, to ensure access, Chinese companies invest in foreign mines.
According to Hilpert, China’s dominance has also been aided by lax labor and environmental regulations and protectionist policies that include export restrictions and generous subsidies. “The Chinese have been able to force other suppliers out of the market with ruinous price competition,” he explains.
Risks in exporting countries
Chinese dominance is not the only concern. Many materials are mined in countries marked by instability and corruption. Like cobalt, a “conflict mineral” that comes mainly from a troubled Congo, in which it is used to pay for the fighting.
There are questions about the future supply of ten other critical raw materials that are mined in troubled countries. These are antimony, bismuth, gallium, germanium and rare earths, which are mined in Tajikistan, China, Russia and Laos; as well as magnesium, niobium, phosphorus, and tungsten, which are found in Kazakhstan, Vietnam, Russia, and China.
Experts agree that its future supply could be affected by nepotism, undemocratic leadership, trade restrictions, civil unrest or even internal wars. The industry could also be affected by consumer boycotts when products are publicly associated with human rights violations.
The European Union plan
As a buyer, the EU is developing a new strategy to ensure “open and unrestricted trade in raw materials,” explained a spokesman for the European Commission’s Defense Industry and Space division. Resorting, if necessary, to international organizations.
In 2012, Europe, the United States and Japan won a case brought to the World Trade Organization, which forced China to lift restrictions on the export of critical raw materials. In February this year, following a request from the EU, the WTO created a panel to assess restrictions on the export of raw materials from Indonesia.
To reduce its dependence on external providers, the EU considers two main approaches. According to its 2020 action plan, the bloc proposes to diversify the sources of its raw materials. The Commission spokesman said member states have been asked to identify mining and processing projects in their territories “that may be operational by 2025.” A business alliance has even been created to facilitate investments.
The second main approach is “reducing dependency through circular use of resources”, although it is not clear whether recycling will have a significant impact or whether the industry will eventually have to find substitute inputs.
Author: Michel Penke