Raw Materials: Europe’s Import Dependency Could Worsen

by | 2. Aug 2023 - 13:17 | Economy

Allianz Research examines the European Union’s supply of critical raw materials and cites the risk of commodity-rich countries forming a cartel.

Diversification of supply chains is essential for the energy transition, given the growing demand for critical minerals. That’s what economists and scientists at Allianz Research found in a study on Europe’s critical commodities situation, according to a press release.

High Risks as a Starting Point

One risk, according to the authors, is that the EU’s already high dependence on imports could be exacerbated by the possibility of a cartel forming: Commodity-rich countries such as China, the Democratic Republic of Congo, South Africa, and Russia could join forces to form an alliance, an “Organization of Metal Exporting Countries.” This could extremely affect the commodity market with price manipulation and restrictions on international trade, the scientists warn.

Considering such a scenario, the researchers raised the question of whether the EU’s Critical Raw Materials Act (CRMA) would be able to close the gap. The CRMA mandates that 10 percent of the EU’s annual consumption of critical minerals must be mined – currently, seven of 18 raw materials, including rare earth metals and tantalum, do not meet this requirement, according to the study. For these, the EU is 94 percent dependent on imports from third countries, the study said. In addition, for 21 of 24 metals, at least 40 percent of the EU’s annual consumption would not come from its own refined production, as required. The CRMA also stipulates that 15 percent of the annual consumption of each raw material should be recycled – according to Allianz Research, this is currently the case for only four out of 16 raw materials.

Europe Must Act: Key Lessons for the EU

To reduce Europe’s dependence and strengthen its position in the global market, the authors make several recommendations for action, including creating a favorable trade policy environment and investing heavily in the circular economy. In addition, the confederation should diversify global supply chains, for example through partnerships with resource-rich countries and the creation of sustainable mineral extraction, including with the help of the EU’s Global Gateway Strategy, which has already been partially implemented (we reported). It is also necessary to promote domestic projects for mining, processing, and recycling of raw materials and to implement the CRMA in practice.

The complete study is available online (PDF).

Photo: iStock/DutchScenery

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