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As war-torn Europe in Ukraine tries to reduce dependence on Russian energy supplies, behind the scenes an even greater risk accumulates
Heavy metals and rare metals are needed for wind turbines, electric cars, solar cells, computer chips. Increasing digitalisation and energy turnarounds will further increase the demand for these special raw materials.
Often their extraction is concentrated in a few regions of the world. Therefore China may cause in the future situations with major headaches. Because Germany imports from the People’s Republic many raw materials, which are inevitable now and will be even more necessary in the future.
Tantalum
In addition, not only in the extraction but also in the processing of the raw materials in question there is a large market concentration and China is one of the most important processors, says Siyamend Al Barazi from the German Agency for Raw Materials, Deutschen Rohstoffagentur (DERA) .
China has almost a monopoly on many raw materials
The European Union is dependent on imports for most metals, from 75 to 100 percent. Of the first 30 subjects, which the European Union has described as “critical”, 19 come mainly from China. These include, for example, magnesium, for which China has almost a monopoly (93 percent from China), rare metals (98 percent) and bismuth (93 percent).
Demand for lithium has increased due to electric cars
This dependence may increase greatly in the future. By 2030, the need for cobalt will be five times greater than before, the EU estimates. The need for lithium has increased due to electromobility because lithium is used for batteries. Thus the need for lithium will increase tenfold by 2030. By 2050, the need for lithium will be even 60 times greater.
Addiction can be used for political pressure
Since 2010 there have been suspicions that China could use the power it has with raw materials to exert political pressure. Beijing at the time restricted exports of rare metals. As a result, prices rose sharply. It all went to the World Trade Organization, China went to arbitration and again lifted export restrictions. “This reinforced the view of Germans and Europeans that China knew little about the rules,” said Raimund Bleischwitz, director of science at the Center for the Study of Tropical Marine Research in Leibniz.
Europe can not be confident that the growing demands will be met in the future. According to an article in the newspaper Handelsblatts (March 25, 2022), experts from the Chinese Ministry of Industry and Information Technology discussed in January 2021 the ban on supplies of rare metals to the US. Europe should not be surprised if supplies of raw materials from China are reduced. In the last five-year plan, Beijing has made it clear that intensive export of raw materials should be limited and that the country should focus more on domestic demand. Instead of exporting raw materials, China should become the market leader in key technologies in the future.
Cobalt mine in Congo
In addition, China wants to become a climate-neutral country by 2060, and for that it needs raw materials with few reserves, just as Europe needs. Thus Beijing has taken precautions and provided through comprehensive investments and contracts access to raw materials in other countries, for example in Africa.
Germany’s efforts to reduce dependence on imports
Germany has also realized the importance of securing raw materials. Efforts have been made for years to diversify raw material imports. For example, rare metals are no longer imported from China, but from Brazil. In addition, in 2010 the German raw materials agency, Deutsche Rohstoffagentur (DERA) was established, which closely monitors retail raw materials and their market presence. “For more than ten years we have known that in different sectors we have a great concentration in the market,” says Al Barazi.
“Unfortunately, there is a kind of cycle in increasing the focus of industry and politics,” says Bleischwitz. “The topic comes into focus if prices rise, as has happened for a year and a half. “When prices rise, trading strategies are developed, but when prices fall again, attention is diverted and nothing is done.”
Thus Germany continues to rely on the import of raw materials with few reserves from China, as DERA notes. The agency sees every two years where, among other things, 27 refinery products come from. The result: Dependence on China is still high. “In 25 such products, ie over 90 percent, China is the main producer. “It is immediately apparent that when something happens in China, the markets move,” said Al Barazi.
It is not necessary for China to want to harm other countries. Even in the People’s Republic more attention is required for sustainable development and protection of the environment. So for example, checks on environmental issues and energy rationing of magnesium producers at the end of last year, led some manufacturers to stop production and the price increased within a few months from 3 thousand dollars to ten thousand dollars per ton. The same thing happened with silicone, Al Barazi points out. Due to power control, the production of salicon, which consumes a lot of energy, decreased.
Europe can open its own mines
Even at the European level, the topic of raw material safety has been simmering for a long time. In the autumn of 2020, the European Raw Materials Alliance (ERMA for short) was established. This alliance should improve supply security for European industry, inter alia by diversifying raw material imports. In addition, Europe wants to open its own mines and take over processing.
“Efforts have been made in the EU for years to further support domestic mines and to re-establish supply chains for the most important raw materials in Europe,” said Al Barazi. Because there are raw materials in Europe as well. But often Europeans do not want to have dirty mines in front of their doorsteps. So in Spain for example, there were just protests against the lithium mine in Estremadura. The population in Serbia and Portugal has also opposed the extraction of lithium. Germany also has lithium, in the Rhine granite layers and in the Saxony mountains. As investor search struggled, lithium extraction will begin in Saxony in 2025.
There is also a problem with the financing of drilling projects and plants for the processing of raw materials, says Al Barazi. There is a lack of capital. If only the price is seen, European production is not competitive. Since the 1990s, China has supported the export of raw materials with state subsidies, greatly expanded its processing capacity, and has liberal rules on environmental issues. This creates the opportunity to keep prices down.
Recycling and booking
With its own mines, Europe, poor in raw materials, will not be able to meet its own needs. Reducing waste can also help solve the problem by discarding less. So for example Europe has made plans to boost the recycling economy. But recycling also has its limits.
As long as demand for raw materials increases, Germany will not be able to meet its recycling needs, says Peter Buchholz of DERA. “Industry can only recycle the quantities that are available. For example 40 years ago, the world’s copper needs were at ten million tons. Today, the needs are for 20 million tons. In addition, products that contain copper can live for decades. This amount of copper is not used for other purposes.
To ensure a ban on imports, many EU countries, the US and Japan have created large reserves of metals and raw materials. Germany has so far established mainly oil and gas reserves.
“Despite the dangers of being addicted to China, we must not forget that China is also dependent on imports from Germany,” said Bleischwitz. “Before the pandemic broke out, China imported more raw materials from Europe than it exported, for example agricultural and forestry machinery, or processed metals.” Dependence is reciprocal.
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