The European Commission has proposed a comprehensive set of actions to ensure the EU’s access to a secure, diversified, affordable and sustainable supply of critical raw materials, which are indispensable for a wide set of strategic sectors including the net zero industry, the digital industry, aerospace and defence sectors.
While demand for critical raw materials is projected to increase drastically, Europe heavily relies on imports, often from quasi-monopolistic third-country suppliers. The EU needs to mitigate the risks for supply chains related to such strategic dependencies to enhance its economic resilience, as highlighted by shortages in the aftermath of Covid-19 and the energy crisis following Russia’s invasion of Ukraine. This can put at risk the EU’s efforts to meet its climate and digital objectives.
The Regulation and Communication on critical raw materials adopted on 16 March leverage the strengths and opportunities of the Single Market and the EU’s external partnerships to diversify and enhance the resilience of EU critical raw material supply chains. The Critical Raw Materials Act also improves the EU’s capacity to monitor and mitigate risks of disruptions and enhances circularity and sustainability.
“This Act will bring us closer to our climate ambitions,” said the President of the European Commission, Ursula von der Leyen. “It will significantly improve the refining, processing and recycling of critical raw materials here in Europe. Raw materials are vital for manufacturing key technologies for our twin transition – like wind power generation, hydrogen storage or batteries. And we’re strengthening our cooperation with reliable trading partners globally to reduce the EU’s current dependencies on just one or a few countries. It’s in our mutual interest to ramp up production in a sustainable manner and at the same time ensure the highest level of diversification of supply chains for our European businesses.”
Together with the reform of the electricity market design and the Net Zero Industry Act, today’s measures on critical raw materials create a conducive regulatory environment for the net-zero industries and the competitiveness of the European industry, as announced in the Green Deal Industrial Plan.
Rystad Energy’s Vice President for battery materials Susan Zou explained that in the upstream mining, the Commission’s Act specifies that domestic extraction capacity should be able to extract the ores, minerals or concentrates needed to produce at least 10 per cent of the EU’s annual consumption of strategic raw materials to the extent that the EU’s reserves allow this. In the processing sector, the proposed Act states the domestic processing capacity, including for all intermediate processing steps, should be able to produce at least 40 per cent of the EU’s annual consumption of strategic raw materials.
According to her, graphite is the biggest bottleneck as the EU only has limited mining capacities where natural graphite is concerned and limited processing capacities for spherical graphite.
“In the optimistic demand scenario, the EU will consume 1.03 million tonnes of graphite in 2030, with 10 per cent of consumption sitting at 102,630 tonnes,” she said. “Meanwhile, the natural graphite mine production in the EU is estimated to be 39,900 tonnes in 2030. In other words, the domestic natural graphite mining capacity is 61 per cent short of the target. In the base case demand scenario, the natural graphite mining capacity in the EU is 37 per cent short of the target.”
In her view, China will continue to dominate natural graphite mining for the foreseeable future, although Canada and some African countries, including Mozambique, Tanzania and Madagascar, are going to contribute increasingly more to the natural graphite supply in the next few years.
And this is just a part of the challenge: we also have to consider graphite processing as well as the need to raise Europe’s processing capacities on manganese as battery demand increases.