Europe's raw materials transition and the RESourceEU plan – A continent at the crossroads: Europe's race against time

When strategic autonomy becomes an economic necessity: Why the EU's plan to diversify critical raw materials could fail before it even begins

The announcement by EU Commission President Ursula von der Leyen on October 26, 2025, marks a turning point in European economic policy. With the RESourceEU plan, Europe aims to break its existential dependence on Chinese raw material imports. But the history of economic transformation teaches us that there is often a gap between political will and economic reality. The EU faces the challenge of establishing, within just a few years, a supply structure that China has systematically developed over decades. The question is no longer whether Europe must act, but whether it is already too late.

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Anatomy of a Vulnerability: Europe's Lifelines in China's Hands

EU Commission President Ursula von der Leyen's announcement in October 2025 to develop a comprehensive plan to phase out Chinese raw material imports is not an isolated economic policy decision. It is a belated admission of a structural misdevelopment that has developed over decades and now threatens the foundations of the European economy. The figures speak for themselves: 98 percent of the rare earths needed in Europe come from Chinese imports; for rare earth magnets, which are essential for electric motors and wind turbines, the dependence is over 90 percent. Germany imports two-thirds of its rare earths directly from China; the European share is 46 percent.

This dependence extends across the entire value chain. China not only controls 70 percent of global mining, but also dominates refining with 85 to 90 percent and the production of downstream products such as permanent magnets with over 90 percent. The picture is even more dramatic in battery production for electric vehicles: China produces more than 98 percent of lithium iron phosphate active materials and, through ownership shares in foreign mines, controls 29 percent of global lithium production and 32 percent of nickel production.

The strategic dimension of this dependence became abundantly clear in October 2024, when China massively tightened its export controls on rare earths. Five more elements were added to the seven rare earth elements already controlled in April, including holmium, erbium, thulium, europium, and ytterbium. This means that twelve of the seventeen rare earth elements are now subject to Chinese export controls. The licensing requirement applies even for metal contents as low as 0.1 percent, which covers virtually all relevant industrial products. Western governments interpret these measures as a direct response to US trade tariffs and as leverage in geopolitical competition.

The consequences are immediately felt by European industry. Without rare earths and critical raw materials, there can be no energy transition, no digitalization, and no defense autonomy. A modern ten-megawatt wind turbine requires two tons of neodymium. Every electric car contains approximately 450 grams of rare earth metals for permanent magnets, as well as an average of twelve kilograms of lithium, four kilograms of cobalt, and 39 kilograms of nickel in the battery. EU demand for rare earths will increase sixfold by 2030, and for lithium by twelvefold. This increase in demand is encountering a supply structure controlled by a single country.

The economic dimension far outweighs the energy issue. While Europe was able to drastically reduce its dependence on Russian energy within two years following the Russian attack on Ukraine, the EU still imported fossil fuels worth over €200 billion from Russia between 2022 and 2025. Comparable diversification is much more difficult for critical raw materials because China is not only a supplier, but also a processor and technology leader. The EU spends almost €100 billion annually on fossil energy imports, but its dependence on critical raw materials threatens industrial sectors worth many times this amount: the automotive industry, defense, aerospace, electronics, and renewable energies together represent a significant share of European economic output.

The RESourceEU plan, which von der Leyen intends to model on the successful REPowerEU program, envisages a combination of recycling, diversification of supply sources, and the development of domestic processing capacities. Partnerships with Ukraine, Australia, Canada, Chile, Kazakhstan, Uzbekistan, and Greenland are intended to break Chinese dominance. The challenge is immense: It is not about replacing one supplier with another, but about establishing complete value chains that China has systematically developed over decades. The analysis must clarify whether this plan has realistic prospects of success or whether Europe is entering a new form of dependency.

From Californian Monopoly to Chinese Empire: The Story of a Global Power Shift

China's current dominance in critical raw materials is no coincidence, but the result of decades of strategic planning. Paradoxically, the story begins not in China, but in the United States. Until the 1980s, the US dominated the global market for rare earths. The Mountain Pass Mine in California produced the majority of the world's rare earth metals between 1965 and 1995, supplying 70 percent of the global supply. The mine was operated by Molycorp, a company that became synonymous with American resource security.

The decline began in the 1990s for two reasons. First, the mine caused significant environmental damage. Between 1996 and 1998, several leaks of radioactive wastewater containing heavy metals occurred, leading to costly regulations and ultimately to its closure in 2002. Second, China had systematically built a parallel industry that forced Western producers out of the market through lower prices. The Chinese advantage was based on three pillars: more lax environmental regulations, government subsidies, and significantly lower labor costs. While German workers cost about $45 per hour, Chinese wages were only $7. Over 99 percent of listed Chinese companies received direct government subsidies, which, according to conservative estimates, were three to four times higher than Western subsidies.

The strategic shift occurred in the 1990s under Deng Xiaoping, who recognized that rare earths could become an instrument of political power. China possessed approximately 37 percent of the world's reserves, primarily in the Bayan Obo mine in Inner Mongolia. This deposit contains 8 to 12 percent rare earth oxides, the highest concentration in the world. Through massive investments and systematic knowledge building, China managed to dominate not only mining but also processing. The country now holds numerous patents for separation processes and is considered a technological leader in refining.

The consolidation of Chinese market power occurred in several phases. Between 2005 and 2011, China drastically reduced its export quotas, leading to the so-called rare earth crisis in 2010. Prices for neodymium and dysprosium soared as China imposed temporary supply freezes, particularly against Japan following a territorial dispute. Following a lawsuit before the World Trade Organization, China lifted formal export quotas in 2015 but retained de facto control through export taxes, domestic production quotas, and strategic reserves. Further consolidation occurred in 2021 with the establishment of the China Rare Earth Group, which combined several state-owned mining companies and placed the industry under direct government control.

At the same time, China secured global control over the entire supply chain through investments in foreign mines. In lithium, Chinese companies like Tianqi Lithium control 29 percent of global production, even though 74 percent of the world's lithium comes from Australia and Chile. In Indonesia, the largest nickel producer, Chinese companies like Tsingshan control 86 percent of production, even though local companies hold less than 5 percent. In Congo, which produces 68 percent of the world's cobalt, China and Europe share control, each with 47 percent.

European passivity over decades was based on the illusion of cheap and stable supply chains. European companies outsourced environmentally harmful extraction to China and profited from low prices. This strategy worked as long as China acted as a reliable supplier. Beijing's strategic shift under Xi Jinping from 2012 onwards fundamentally changed this calculation. China began using critical raw materials as a geopolitical lever, initially subtly through quota regulations, later through explicit export controls.

The EU first recognized the problem in 2011 with the first list of critical raw materials. This list grew from 14 raw materials in 2011 to 34 in 2023. The Critical Raw Materials Action Plan, published in 2020, was a first attempt at structured countermeasures. However, it was not until the Critical Raw Materials Act of 2023, which came into force in May 2024, that binding targets were set: By 2030, at least 10 percent of the EU's demand should come from domestic mining, 40 percent from European processing, and 25 percent from recycling. Furthermore, no more than 65 percent of a strategic raw material may come from a single third country.

Historical analysis shows that Europe's dependence is the result of conscious economic policy decisions made over decades. China exploited Western shortsightedness to systematically establish a monopoly position. Attempting to reverse this structure within a few years is like trying to replace an ecosystem that has developed over decades overnight. The question is not whether Europe needs to become more independent, but whether there is still enough time to do so.

The logic of dominance: Why the commodity market works differently

The market structure for critical raw materials differs fundamentally from conventional commodity markets. While multiple suppliers exist for crude oil and iron ore, and substitution is possible, a quasi-monopoly structure prevails for rare earths and strategic metals. China controls not only production but the entire value chain from the mine to the final product. This vertical integration creates dependencies that cannot be resolved through simple diversification.

The economic drivers of this structure are diverse. The most important factor is economies of scale in processing. The separation and refining of rare earth oxides is a complex chemical process that requires significant capital investment and specific know-how. Over decades, China has not only built up production capacity but also optimized processes and secured patents. Western companies seeking to enter the market today must catch up with this knowledge advantage while competing against subsidized Chinese competitors.

A second driver is environmental costs. Rare earth mining is one of the most environmentally damaging mining processes of all. Large quantities of highly toxic acids are used for extraction, radioactive waste is generated through the release of thorium and uranium, and toxic sludge remains. In the Bayan-Obo region of Inner Mongolia, environmental damage has reached catastrophic proportions. A huge holding pond filled with low-level radioactive sewage sludge is located just ten kilometers from the Yellow River and seeps toward the river at a rate of 300 meters per year. Entire regions have become uninhabitable, groundwater is contaminated, and the desertification of the Mongolian steppes is accelerating. The UN named Baotou as one of the 50 most polluted regions in the world in 2024.

These environmental costs explain China's cost advantage. While Western countries have strict environmental regulations that make mining more expensive or impossible, China has accepted this externalization. The social price is borne by the local population, especially Mongolian nomads, whose livelihoods have been destroyed. This cost structure makes it virtually impossible for Western producers to compete without either lowering environmental standards or receiving massive subsidies.

A third factor is demand-side development. The need for critical raw materials is increasing exponentially due to two megatrends: the energy transition and digitalization. A modern ten-megawatt offshore wind turbine requires two tons of neodymium. The EU aims to massively expand its wind power capacity by 2030. With an average demand of 0.2 tons of neodymium per megawatt of installed capacity, every gigawatt of additional wind power requires 200 tons of neodymium. The dynamic is similar for electric vehicles. A 60-kWh battery contains five kilograms of lithium, five kilograms of cobalt, 39 kilograms of nickel, and five kilograms of manganese. The EU is aiming for a de facto ban on combustion engines by 2035. This means millions of additional electric vehicles, each with a raw material requirement many times greater than that of a combustion engine.

The players in this market have asymmetric interests. On the Chinese side, there is a coordinated state actor that plans for the long term and uses raw materials as an instrument of power. The consolidation of the industry into six large state-owned companies since 2021 underscores this strategy. On the European side, private companies dominate, with quarterly horizons and pressure to achieve profitability. Building one's own mines and refining capacities is capital-intensive, risky, and takes years or even decades. Investors demand returns that are difficult to achieve under current market conditions. The state must therefore act as a risk hedger and financier, which is politically controversial and fiscally burdensome.

Market mechanisms exacerbate this asymmetry. China can manipulate prices through export restrictions and quota regulations. Between 2010 and 2011, prices for rare earth metals increased dramatically when China curbed exports. Such volatility makes investments in Western production capacities riskier. A company that invests in a mine or refinery today must expect that China will lower prices tomorrow to eliminate the competitor. This strategy has worked several times. Molycorp, the operator of the Mountain Pass Mine, went bankrupt in 2015 after China relaxed export quotas following the end of the 2011 price crisis, causing prices to collapse.

The strategic lever the EU created with the Critical Raw Materials Act attempts to break these market mechanisms. Establishing benchmarks for domestic extraction, processing, and recycling is intended to create planning security. Limiting dependence on a single country to a maximum of 65 percent is a political signal. However, these targets will only be economically effective if investment incentives, financing instruments, and risk hedges are created at the same time. The RESourceEU plan must therefore go beyond supplier diversification and rebuild the entire value chain. The question is whether the EU has the necessary resources, political will, and time to achieve this.

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Beyond import statistics: The hidden depths of European dependence

A quantitative analysis of the current supply situation reveals the magnitude of the challenge. Germany imported a total of 5,200 tons of rare earths worth €64.7 million in 2024, a decrease of 12.6 percent compared to 2023. Of this amount, 65.5 percent came directly from China, or 3,400 tons. The second most important country of origin was Austria with 23.2 percent, followed by Estonia with 5.6 percent. However, this statistic is misleading, because rare earths are merely processed in Austria and Estonia; their original origin is not statistically verifiable, but is likely largely China as well.

A similar picture emerges at the EU level. The entire EU imported 12,900 tons of rare earths worth €101 million in 2024. 46.3 percent came from China, 28.4 percent from Russia, and 19.9 percent from Malaysia. Dependence on Russia is politically unacceptable in light of the war in Ukraine, and Malaysia also primarily processes Chinese raw materials through the company Lynas. Thus, real Chinese control is significantly higher than the official import statistics.

For certain elements, the dependence is even more extreme. Lanthanum compounds, which are needed for batteries, came from China in 2024, with 76.3 percent of their imports. Neodymium, praseodymium, and samarium, which are essential for permanent magnets in electric motors, were almost entirely imported from China. These elements are irreplaceable; without them, no modern wind turbine or electric vehicle can be built.

Although import volumes are manageable in absolute terms, their strategic importance is immense. The peak in volume for Germany over the past ten years was 9,700 tons in 2018. The decline to 5,200 tons in 2024 reflects not successful diversification, but rather economic weakness and production problems in European industry. The International Energy Agency forecasts that EU demand for rare earths will increase sixfold by 2030, twelvefold for lithium, and fivefold for cobalt. This increase in demand is encountering a supply structure that is almost entirely controlled by China.

The challenges go beyond import-export statistics. A key problem is the lack of domestic processing capacity. Europe has virtually no facilities for separating and refining rare earth oxides. The only significant capacity outside of China is found in small pilot plants in Estonia and, to a limited extent, in France, which, however, are irrelevant in terms of quantity. Building such plants takes years and requires billions in investment. Even if Europe finds alternative supplier countries such as Australia or Canada, the raw materials would have to be sent to China for processing, which would only shift the dependency but not eliminate it.

A second problem is recycling. Currently, only about one percent of rare earths are recycled. The reasons are technical and economic. Permanent magnets are permanently embedded in end products and difficult to dismantle. The chemical processing to recover the metals is complex and expensive. Many products containing high concentrations of rare earths, such as electric car batteries and magnets in wind turbines, are still in use and years away from being phased out. An effective recycling system could meet 25 percent of the EU's needs in the long term, but it will take decades to establish.

The diversification of supply sources envisaged in the RESourceEU plan faces practical limitations. Ukraine possesses significant reserves of lithium, graphite, titanium, and 22 of the 30 raw materials classified as critical by the EU. However, many deposits are located in contested areas in the east of the country, and the infrastructure has been destroyed by Russian attacks. Greenland possesses one of the world's largest reserves of heavy rare earths, but the deposits are located far from any infrastructure, some of them buried beneath glaciers. Development costs are estimated at up to $2.3 billion, and so far, not a single mine is in operation.

Chile is the world's second-largest lithium producer, and the EU entered into a strategic raw materials partnership in 2023. However, industrial cooperation is falling short of expectations. Chile strives for greater local added value and does not want to be merely a raw materials supplier. The EU must therefore invest in Chilean processing capacities, which ties up time and capital. Australia produces 53 percent of the world's lithium, but Chinese companies control 29 percent of production through stakes in Australian mines. Diversification therefore only partially shifts dependence from the extraction level to the ownership level.

The current situation has been exacerbated by China's latest export controls, which began in October 2024. The licensing requirement for metals with a metal content of just 0.1 percent covers virtually all relevant industrial products. Companies must share sensitive information with Chinese authorities before receiving an export license. This process takes months and creates massive uncertainty. European automakers and suppliers are already warning of production cuts. Prices for dysprosium, terbium, and yttrium have reached record levels on the spot market.

The quantitative assessment shows that Europe finds itself in a situation of strategic vulnerability that cannot be resolved in the short term. Even with immediate and decisive action, it will take years to develop new mines, build processing capacities, and establish recycling systems. The Critical Raw Materials Act's 2030 targets are ambitious, but the reality shows that the development of domestic capacities is progressing more slowly than planned.

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From California to Kyiv: A look at the global arenas of the raw materials war

The US's experience in rebuilding its own raw material capacities offers important lessons for Europe. The Mountain Pass Mine in California is the key example. After its closure in 2002 and Molycorp's bankruptcy in 2015, MP Materials took over the mine in 2017. With the support of Chinese investors, particularly the state-owned company Shenghe Resources, it was successfully restarted. By 2022, the mine produced 42,000 tons of rare earth oxides annually, three times as much as under Molycorp. In 2024, production reached over 45,000 tons, meeting approximately 15.8 percent of global demand.

However, its success was tied to a dependence on China. Approximately 80 percent of production was exported to China as concentrate for further processing because there was no refining capacity in the United States. Shenghe Resources held an 8 percent stake and was also the main buyer. When China imposed steep tariffs and new export restrictions in 2025, MP Materials stopped all shipments to China and invested nearly one billion US dollars in building its own processing facilities. The company also established a joint venture with Saudi Arabia's Ma'aden to break away from the Chinese market.

The lesson from this case is ambivalent. On the one hand, Mountain Pass shows that rebuilding domestic production capacity is possible with sufficient capital and political will. On the other hand, the episode highlights that production alone is not enough. Without domestic processing capacity, dependence on China remains. Building this capacity takes years and costs billions. Furthermore, the environmental issue remains unresolved. The Mountain Pass mine remains under close scrutiny due to potential environmental risks, particularly radioactive waste disposal and water pollution.

The US has also created massive subsidies for critical raw materials through the Inflation Reduction Act of 2022. The law provides a production subsidy of ten percent of the cost of critical minerals, and for battery cells, even $35 per kilowatt-hour. Tax credits of up to $7,500 are available for electric vehicles, but only if 40 percent of the battery raw materials come from North America or free-trade countries, with a gradual increase to 80 percent by 2027. Starting in 2025, critical minerals may no longer originate from China, Russia, or other "foreign entities of concern." This regulation forces US manufacturers to diversify but also creates trade conflicts with Europe, as European producers are disadvantaged.

A comparison with Australia reveals a different strategy. Australia is the world's largest lithium producer, accounting for 53 percent of global production. However, the country lacks a significant processing industry of its own. 74 percent of the world's lithium comes from Australia and Chile, but Chinese and US companies hold the largest shares of production. Australia benefits from raw material exports but remains at the bottom of the value chain. The EU concluded a strategic raw materials partnership with Australia in 2024, encompassing the entire value chain from exploration and mining to processing. However, concrete projects have been scarce so far.

Lynas, an Australian company, is the only significant producer of light rare earths outside of China. The company operates mines in Australia and a separation plant in Malaysia. Lynas receives significant support from the US Department of Defense, which pledged $30 million for a light rare earth separation plant in Texas. In 2023, Lynas became the first non-Chinese company to commercially produce a heavy rare earth element. This success demonstrates that breakthroughs are possible, but only with significant government support and over long periods of time.

Chile offers insights into the complexity of raw materials partnerships. In 2023, the EU concluded a Memorandum of Understanding with Chile on a strategic raw materials partnership. Chile is the world's second-largest lithium producer and accounts for 25 percent of global copper production. The partnership envisages scientific and technological cooperation, infrastructure development, and joint ventures. A roadmap with concrete projects was agreed in November 2024. However, implementation is stalling. Chile demands greater local added value and does not want to remain solely a raw materials supplier. The EU must therefore invest in Chilean processing capacities, which requires synergies between raw materials, renewable energies, and hydrogen. Furthermore, the EU competes with China and the USA for access to Chilean resources.

Ukraine represents a special case. The country has one of the largest lithium deposits in Europe and over 22 of the 30 raw materials classified as critical by the EU. Estimated lithium reserves amount to approximately 500,000 tons, but production has been halted due to the war. Many deposits are located in the contested regions of Zaporizhia and Donetsk, which are partly under Russian control. After the war, Ukraine could play a key role in Europe's raw material supply and finance reconstruction with sales proceeds. However, this requires a rapid peace, massive investments in infrastructure and processing capacities, and years of reconstruction work. In the short term, Ukraine is not a solution to Europe's raw materials problem.

The EU's Global Gateway Initiative seeks to build raw materials partnerships through investments in Africa and Latin America. Since 2021, the EU has concluded 14 strategic raw materials partnerships, including with Australia, Canada, Chile, Ukraine, Greenland, the Democratic Republic of Congo, and Zambia. These partnerships cover raw material processing, research, infrastructure development, and sustainability standards. However, implementation is slow, and few roadmaps are publicly available. The EU is also competing with China's Belt and Road Initiative, which has made massive investments in African infrastructure for years.

The case studies show that building domestic raw material capacities is possible, but it requires massive government support, long-term investments, and strategic patience. The US has mobilized billions with the Inflation Reduction Act; the EU must create similar instruments. Diversifying supply sources will only work if processing capacities are built simultaneously. Partnerships with resource-rich countries are necessary, but complex and time-consuming. Competition with China and the US for access to resources is intensifying. Europe must prove that it is a reliable partner that not only buys raw materials but also engages in genuine development cooperation.

The breaking points in the plan: time, money and unresolved conflicting objectives

The ambitious goals of the RESourceEU plan encounter a number of structural obstacles and unresolved trade-offs. The first problem is temporal. The Critical Raw Materials Act sets targets for 2030, i.e., in five years. This timeframe is unrealistically short for the development of complete value chains. The development of a new mine takes an average of ten to fifteen years from exploration to production. The construction of refinery plants takes five to ten years. Approval procedures in Europe are notoriously lengthy. Even if all political decisions were made today, the first quantities of domestic production would not reach the market until the mid-2030s at the earliest. The 2030 targets should therefore be understood more as a political signal than as realistic planning.

The second problem is financial. The EU Commission estimates that implementing the Critical Raw Materials Act will require additional investment of €210 billion by 2027. This sum is to come partly from EU funds, partly from national budgets, and primarily from private investment. However, private investors are reluctant as long as China can make new mines unprofitable at any time through price and quota manipulation. The Molycorp example shows how quickly investments can be destroyed. Without government risk protection, sales guarantees, and long-term subsidies, private investment will not flow in the necessary volume. The EU is also competing with the USA, where the Inflation Reduction Act, with $400 billion, is creating massive incentives.

The third problem is the trade-off between climate protection and raw material extraction. Rare earth mining is extremely environmentally damaging. In China, decades of mining in Inner Mongolia have led to ecological disasters. Radioactive sludge contaminates groundwater, rivers, and soil. The question is whether Europe is willing to accept similar environmental damage, or whether stricter standards will make production more expensive and unprofitable. Greenland, for example, banned uranium mining in 2021, which also affects rare earth projects, which are often associated with radioactive thorium. The balance between raw material security and environmental protection is highly controversial politically.

The fourth problem is the recycling illusion. The Critical Raw Materials Act aims for a 25 percent recycling rate by 2030. However, the current rate is around one percent. While the technologies for efficient recycling of rare earths exist at laboratory scale, they are not commercially established. Many products containing high concentrations will remain in operation for years. Even if all decommissioned wind turbines and electric cars were recycled immediately, a significant amount would not be available for another ten to twenty years. Recycling is essential in the long term, but it does not solve the short-term supply problem.

The fifth problem is competition for raw materials. Europe is in global competition with China, the USA, and other industrialized countries. China already consumes 87 percent of the world's rare earths, 35 percent of the world's nickel, and over 50 percent of the world's lithium and cobalt. This demand will continue to rise because China is investing heavily in electromobility and renewable energies. The USA is securing preferential access to North American raw materials and free trade partners through the Inflation Reduction Act. Europe has less leverage. The Global Gateway Initiative is trying to build raw materials partnerships through infrastructure investments in Africa and Latin America. But China has made massive advances there for years. The Belt and Road Initiative has invested billions in African infrastructure and built close relationships. Europe must prove that it is a better partner, which will require time and money.

The sixth problem is political. Diversification from China to other suppliers such as Ukraine, Greenland, or African states creates new dependencies and geopolitical entanglements. Greenland is part of Denmark but is striving for greater autonomy. US President Donald Trump has repeatedly expressed interest in Greenland and has not ruled out military pressure. Ukraine is a war zone, and its natural resources are partly under Russian control. Partnerships with autocratic regimes in Africa and Central Asia raise ethical questions, similar to those of the current dependence on China. The EU risks slipping from one dependency to the next without gaining fundamental control over supply chains.

The seventh problem is the question of defense capability. Critical raw materials are essential not only for climate technologies but also for defense equipment. Electric motors in drones, electronics in rockets, alloys in engines—all of these require rare earths, titanium, nickel, cobalt, and other strategic metals. Dependence on China threatens European defense autonomy. In the event of a conflict, China could stop deliveries and strategically blackmail Europe. The RESourceEU plan must therefore also include a defense dimension, which further increases the complexity and required investment.

The debate about the right path is controversial. Proponents of an offensive strategy are calling for massive government investment, subsidies, and, if necessary, protectionist measures such as import tariffs on Chinese manufactured goods. Critics warn of an escalation of trade conflicts that could harm Europe as a whole because China would disappear as a sales market for European products. The automotive industry is torn: on the one hand, it needs secure raw material supplies, but on the other, it is dependent on the Chinese market. A trade war would put European manufacturers in a difficult position.

Another controversy concerns the role of the state versus market mechanisms. Liberal economists argue that government control and subsidies lead to inefficiencies and misinvestments. They advocate for market-based solutions and warn against a renaissance of the planned economy. Pragmatists counter that market mechanisms have failed in the case of strategic raw materials because China itself is not a market participant but a state actor. Without government countermeasures, Europe has no chance. The Critical Raw Materials Act is a compromise that sets targets but largely leaves implementation to the market. Whether this middle ground will work remains to be seen.

The critical assessment shows that the RESourceEU plan is necessary, but fraught with considerable risks. The timeframe is too short, the costs immense, and the conflicting objectives remain unresolved. Without decisive action, Europe remains vulnerable, but rash action could exacerbate the situation. Finding the balance between resource security, climate protection, economic efficiency, and geopolitical wisdom is the key challenge.

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Five paths into the future: Possible scenarios for Europe's raw material supply

Developments in the coming years will be determined by several scenarios, which are not mutually exclusive but may partially overlap. The first scenario is gradual diversification with limited success. In this case, the EU succeeds in gradually reducing its dependence on China, but cannot overcome it. New partnerships with Australia, Canada, Chile, and Ukraine supply additional raw materials, but processing remains largely in China. Europe builds its own refining capacities, which will cover around 20 to 30 percent of demand by the mid-2030s. Recycling will reach a rate of 15 percent by 2035. Overall, dependence on China will decrease from the current level of over 90 percent to around 50 to 60 percent by 2035. This would be a partial success, but it would leave Europe vulnerable.

The second scenario is technological disruption through substitution. Research and development could achieve breakthroughs in materials that partially or completely replace rare earths. In permanent magnets, there are approaches to substituting neodymium with ferrite or other compounds, albeit with performance losses. In batteries, the trend could be toward sodium-ion batteries or solid-state batteries, which require fewer or different critical raw materials. Such innovations could lower demand for certain elements and structurally reduce dependence on China. However, these technologies are not yet market-ready, and the transition will take decades. Furthermore, each new technology often creates new dependencies on other materials.

The third scenario is geopolitical escalation with supply disruptions. In the event of a conflict, for example over Taiwan, China could impose export bans on critical raw materials. This would cripple European industry in the short term. Production chains for electric vehicles, wind turbines, and electronics would collapse. The economic damage would be immense, similar to the oil embargo of the 1970s. This scenario is a nightmare for European planners and the main driver behind the RESourceEU plan. The EU must build emergency reserves and organize storage, which is expensive and practically difficult because many raw materials are imported as intermediate products that cannot be stored.

The fourth scenario is successful strategic autonomy. In this optimistic scenario, the EU will achieve a comprehensive restructuring of its raw materials supply. Its own mines in Scandinavia, Greenland, and Central Europe will be developed, processing capacities will be massively expanded, recycling will be established, and international partnerships will be consolidated. By 2040, Europe will cover 40 percent of its needs through its own production and processing, 30 percent through recycling, and only 30 percent through broadly diversified imports. However, this scenario requires political will, enormous investment, and time. It presupposes that Europe is willing to accept environmental costs, pay subsidies, and plan for the long term. The likelihood of this scenario is low, but not impossible, given the EU's political fragmentation and short timeframe.

The fifth scenario is the regional fragmentation of the global economy. Competition between the US, China, and Europe for raw materials leads to economic blocs, each building its own supply chains. The US secures North America, parts of Latin America, and selected Pacific partners. China controls Asia, parts of Africa, and the Middle East. Europe seeks to cooperate with Africa, Latin America, and Ukraine. This fragmentation reduces the efficiency of the global economy, increases costs, and slows the energy transition. However, it also creates more stable, albeit more expensive, supply chains within each bloc. This scenario is a realistic development, the beginnings of which are already visible.

Potential disruptions could overshadow or accelerate these scenarios. A first disruption would be a rapid peace agreement in Ukraine with Western support for reconstruction. Ukraine could become an important supplier of raw materials for Europe within ten years. A second disruption would be regime change in China or a fundamental reorientation of Chinese policy, such as an opening of the raw materials market or, conversely, even greater isolation. Both would fundamentally change European strategy. A third disruption would be a technological breakthrough in energy storage or transportation that structurally reduces demand for rare earths.

The time dimension is crucial. The 2020s are the critical phase. If Europe fails to make substantial progress by 2030, its dependence on China will be cemented because demand will increase exponentially. The next five years will determine strategic autonomy for the coming decades. The REPowerEU model shows that, with sufficient pressure, Europe can act quickly. Following the Russian attack on Ukraine, the EU reduced its gas imports from Russia from 47 percent in 2019 to less than 20 percent in 2024. This success was based on diversification, LNG imports, energy savings, and the accelerated expansion of renewable energies. The RESourceEU plan must ignite similar momentum.

The role of technology is ambivalent. On the one hand, breakthroughs in substitution, recycling, or efficiency could reduce demand. On the other hand, every new technology such as artificial intelligence, quantum computing, or advanced defense systems drives the demand for specific raw materials. The digitalization of all areas of life increases dependence on critical metals. Europe cannot grow its way out of this dependence but must actively develop alternatives.

The international dimension is crucial. The EU cannot solve the problem alone. Cooperation with like-minded partners such as the US, Canada, Australia, and Japan is essential. A "Critical Raw Materials Club," proposed by the EU, could coordinate common standards, research, and emergency reserves. At the same time, the EU must maintain dialogue with China to avoid escalations. The balance between confrontation and cooperation is delicate but necessary.

The outlook is mixed. Europe has recognized the challenge and taken initial steps. The Critical Raw Materials Act, the RESourceEU plan, and the raw materials partnerships are instruments that can take effect. But time is short, the costs are high, and the trade-offs are unresolved. The most likely scenario is a gradual diversification with limited success, leaving Europe more vulnerable than necessary, but less dependent than today. Strategic autonomy will be a long-term project spanning decades, not years. Europe must learn to live with uncertainty and actively manage risks.

Time to act: Imperatives for politics, business and investors

The announcement of the RESourceEU plan marks a long-overdue paradigm shift in European economic policy. For decades, Europe benefited from the illusion of stable and inexpensive raw material supplies from China. This illusion has been shattered. The Chinese export restrictions of October 2024 are not a temporary measure, but part of a long-term strategy to use critical raw materials as a geopolitical power tool. Europe faces a choice between strategic autonomy and permanent vulnerability.

The analysis shows that the path to independence is rocky, costly, and lengthy. The goals of the Critical Raw Materials Act for 2030 are ambitious, but not unrealistic if decisive action is taken now. Ten percent domestic production, 40 percent European processing, and 25 percent recycling are achievable, but require investments in the hundreds of billions of euros, political consensus spanning decades, and a willingness to accept environmental costs and social disruption. Diversification to a maximum of 65 percent dependence on one country is a sensible benchmark that creates resilience without creating the illusion of self-sufficiency.

The strategic implications for policymakers are clear. First, financing must be secured. The EU needs a raw materials investment program similar to the US Inflation Reduction Act, with subsidies, risk hedges, and sales guarantees for private investors. The €210 billion estimated by the Commission is a minimum, not a maximum. Second, permitting procedures must be drastically accelerated. The Critical Raw Materials Act stipulates 27 months for mining licenses and 15 months for processing and recycling facilities. These deadlines must be met, which requires reforms to national mining laws and environmental regulations. Third, recycling must be treated as a strategic priority. Product design must be geared towards recyclability from the outset, collection systems established, and research into recycling technologies massively promoted.

Business leaders also need to take action. The days of stable and favorable raw material prices are over. Companies must diversify their supply chains, build strategic inventories, and invest in the development of low-resource or raw material-substituting technologies. Long-term supply contracts with non-Chinese producers should be secured, even if they are more expensive. Cooperation with competitors in pre-competitive consortia for raw material procurement and recycling can create economies of scale and share risks.

The raw materials transition presents both opportunities and risks for investors. Companies that mine, refine, or recycle will benefit from demand, but they also face significant regulatory and operational risks. Technology companies developing substitute solutions could achieve breakthroughs or fail due to technical limitations. The political dimension makes investments in critical raw materials more complex than in other sectors. Government subsidies and regulations can determine success or failure.

The long-term importance of this issue cannot be overestimated. Critical raw materials are the foundation of the energy transition, digitalization, and defense capability. Without secure supplies, European climate policy will fail, digital sovereignty will remain an illusion, and strategic autonomy will be unattainable. Dependence on China is more existentially threatening than dependence on Russian energy because substitution is more difficult and demand is structurally rising.

Historical comparisons with previous raw material crises teach us that transformations are possible, but they take time. The oil crises of the 1970s led to the diversification of energy supplies, efficiency improvements, and the creation of strategic reserves. This process took decades. The semiconductor supply crisis during the COVID-19 pandemic led to investments in European chip factories, the effects of which will not become apparent until the 2030s. The raw material transition follows the same pattern: Today's decisions determine tomorrow's security of supply.

The geopolitical dimension makes the challenge more complex. Europe must simultaneously compete, cooperate, and confront China. A total break is neither possible nor desirable, because China remains a sales market, technology partner, and raw material supplier. Balancing dependency reduction and constructive relations is the central diplomatic task of the next decade. The RESourceEU plan should not be understood as a declaration of war on China, but rather as an insurance policy against strategic blackmail.

The final assessment is ambivalent. The RESourceEU plan is necessary, long overdue, and fundamentally correct. The combination of diversification, recycling, domestic production, and international partnerships is the only path to greater resilience. But implementation is still pending. History is rife with well-intentioned plans that have foundered due to political resistance, financial bottlenecks, or technical obstacles. Europe's success depends on whether political will persists across legislative periods, whether the necessary investments are made, and whether the population is willing to accept higher costs and environmental impacts.

The next five years are crucial. If Europe fails to make substantial progress by 2030, Chinese dominance will be cemented. The energy transition will become more expensive, slower, and more dependent on a country that uses raw materials as a weapon. Strategic autonomy remains out of reach. But if Europe acts decisively now, this dependence can be gradually reduced. Complete independence is neither possible nor necessary. Resilience through diversification is the realistic goal. The RESourceEU plan is the first step on a long journey. Whether Europe follows this path to the end will determine the continent's competitiveness, security, and future viability.

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