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Europe must move faster to stockpile critical minerals or risk falling behind in securing supplies, industry leaders have warned, as the bloc seeks to reduce reliance on China for materials for defence and clean technology.
Brussels will launch a consultation on stockpiling before year-end on funding and what minerals should be acquired, according to EU officials, essentially to diversify away from foreign sources.
European Commission president Ursula von der Leyen told EU lawmakers on Wednesday that “a crisis in the supply of critical raw materials is no longer a distant risk”.
In a work plan for next year, the commission this week said that it would set up a “critical raw materials centre to monitor, jointly purchase and stockpile” minerals.
But Europe will have to compete with the US, which has already stepped up stockpiling with a $1bn buying spree. And the bloc’s limited mining or refining capacity makes it difficult to secure minerals — from graphite and cobalt to gallium — needed to produce military equipment such as fighter jets, precision missiles and radar systems, and green technology such as wind turbines and magnets.
The move to stockpile is part of an escalating trade war between the west and China, which has spent two decades building a dominance in critical minerals. Beijing last week unveiled sweeping controls on exports of rare earths, after warning foreign companies in August not to build stocks or risk having their access to metal cut off.
EU trade commissioner Maroš Šefčovič spoke to China’s commerce minister Wang Wentao on Tuesday about the impact of the rare earth export controls on EU businesses. The commission has hinted that it could use trade measures against China but they would have to be agreed by a majority of member states.
“It is all linked to China’s dominance of the market and the fact that we procure 80-90 per cent plus of critical minerals from China,” said Albéric Mongrenier, executive director of the European Initiative for Energy Security think-tank. “A stockpile is a reserve that could help stabilise prices and reassure investors in the critical minerals sector.”
Industry is sceptical about how well stockpiling of critical minerals — which includes rare earths and more common but important metals such as lithium and aluminium — could be arranged among 27 countries.
James Watson, director-general of the metals industry body Eurometaux, said everything depends on how it is organised. ‘‘Clear rules would need to be addressed as to who controls the release of such a stockpile and how member states access stockpiles on other member states’ territory.”
In a document setting out plans to build up the bloc’s strategic stocks in July, the commission said the EU faced “an increasingly complex and deteriorating risk landscape” that “ultimately translates into a higher overall threat to the security and availability of essential supplies”.
Nascent plans to develop minerals stockpiles at a national level are under way. Germany plans to invest €1bn into raw materials to help break its dependence on China through its development bank KfW. France has established a €500mn equity fund to bolster domestic production of metals.
The commission is also stepping up efforts to use development aid in a more transactional manner to secure supplies.
One mining executive said the EU risked entrenching its dependency on China or others by buying more metals from the country in order to accumulate reserves. A first step should be to produce more domestically and grow the continent’s mining and metals processing capabilities, they said.
Europe has limited operational mines and very few metals processing facilities, with the lead times needed to establish such facilities years-long. Several minerals such as graphite and cobalt are critical for defence capabilities but in such small amounts that mining and processing for defence alone is not a commercially viable prospect.
Another concern is how difficult some materials are to store. Paul Lusty, head of battery raw materials research at price reporting group Fastmarkets, pointed out that traders aimed to hold limited stocks in warehouses and maintain “churn”, given the cost of storage and the risk of the metal spoiling. “Lithium hydroxide typically has a shelf life of approximately six months — if it has been stored correctly,” he said.
Europe has strategic oil stocks, but not minerals. Industry figures have cautioned that the bloc is far behind other regions including the US, which stockpiles metals with a military application and has sought to procure up to $1bn of minerals to bolster national stocks.
Analysts have noted that Nato could play a role, as dual-use critical minerals could fall within the scope of the increased Nato defence spending target.
Allard Castelein, the Dutch government’s special representative for the raw materials strategy, said it was clear that ‘‘changes are required’’.
Castelein is one of several envoys appointed by EU governments to try to identify bottlenecks, find alternative suppliers and build up the continent’s reserves of the minerals it needs most.
As a pilot project, the Dutch government has asked the shipyard building two new frigates for its navy to map out which minerals and materials are critical to their production, including for weapons and radar systems.
Castelein said the Netherlands was mapping out the value chain order to understand what it would take to build up strategic stockpiling, so that the country could ‘’at all points in time, state that we have a fully operational frigate’’.
Several European officials mentioned modelling efforts on the approach taken by Japan, which started stockpiling metals in 1983.
Castelein’s French counterpart Benjamin Gallezot said one of the problems with stockpiling critical minerals was deciding which to focus on.
“Some metals with a low criticality today could become critical in the next 20 years and some that are critical today we have solutions that will be implemented in a few years,” he said.
