EU to face 'economic woes' if it reduces reliance on China's mineral supply, say experts

Ursula von der Leyen, president of the European Commission, recently suggested new legislation to lessen the European Union's (EU) reliance on China for supplies of vital minerals, rare earth metals and lithium, despite the continent's persistent energy crisis. Industry insiders, however, have criticised Von der's action and claimed that restructuring will take time and cost more money, which will really worsen the continuing inflation in Europe in the midst of the present energy crisis.

In the annual State of the Union address, Leyen said, "We will identify strategic projects throughout the supply chain, from extraction to refining, from processing to recycling. And we will build up strategic reserves where supply is at risk. This is why today I am announcing a European Critical Raw Materials Act." 

The action by the EU, according to industry experts, might make it more expensive for Europe to meet its environmental goals as the energy crisis gets worse. China supplies over 16,000 rare-earth permanent magnets to Europe each year, which accounts for about 98% of the EU market, according to a research from the European Raw Materials Alliance.

'Consequences will be more severe': Experts

"The consequences of decoupling from Russian energy imports are already dramatic for citizens and industries in Europe...if we now add raw materials sourced from China, the consequences will be even more severe," a Berlin-based expert associated with the Schiller Institute, an international think tank, Stephan Ossenkopp said, Global Times reported.

Notably, commerce between the 27 EU countries and China reached a record high of 413.9 billion euros in the first half of this year and exceeded a high of USD 820 billion in 2021. The production of rare earth elements is limited to a few nations, but they are vital to technology, including speakers, microchips, and X-ray imaging. While the west is aiming for self-reliance in the procurement of scarce metals and minerals, China still holds the global lead in rare earth elements.

In particular since the beginning of 2020, other rare earth-producing nations like Australia have been attempting to increase the robustness of their supply chains. Furthermore, it is no longer only about rare earth elements; if Europe is serious about terminating all Russian crude oil and refined fuel imports by early next year, the key to success lies in Asia, notably China.

Image: AP