EU Makes $2 Billion Push to Curb Reliance on China’s Rare Earths
(Bloomberg) -- The European Union is pushing for the continent to establish its own supply of rare earths to reduce an uneasy reliance on China for the elements crucial to electric cars, wind turbines and mobile phones.
A plan released Thursday by the European Raw Materials Alliance, set up by the EU last year, calls for governments and manufacturers to support mining and processing through a mix of subsidies and sales quotas. The group identified 14 projects on the continent -- from mining to magnet production and recycling -- that will require about 1.7 billion euros ($2 billion) of total investment.
Giving the nascent industry a leg up will be critical to competing with cheaper Chinese suppliers with lower environmental and labor standards which provide 90% of rare earth magnets used in traction motors, the alliance said.
“The commission’s in-depth review of critical supply chains and key technologies has highlighted the EU’s high level of foreign dependency on inputs required for our green and digital transition,” Thierry Breton, EU commissioner for the internal market, said in a statement. “The EU depends on others -- mainly China -- for the import of permanent magnets, as well as the rare earth elements they are made of.”
The race for rare earths is gaining traction in the midst of booming demand from the likes of Volkswagen AG, Stellantis NV and Vestas Wind Systems A/S. China is expected to use up much of its own production in future, posing a risk to the EU’s ambitious plans to fight climate change. Last year, the bloc overtook China in electric-car sales, which made up 17% of deliveries during the first half of the year.
Vulnerabilities surrounding the materials were magnified in 2019, when China mulled whether to use its position as the world’s dominant supplier as a cudgel in its trade war with Washington. Echoing efforts by the U.S. to reduce dependence, the EU is looking to meet 20% of demand with local sourcing. Projects range from mining in Sweden and Finland to rare earth separation in Poland and magnet-making in Slovenia.
In addition to building European supply pretty much from scratch, the EU should help establish strategic partnerships with resource-rich countries, including for recycling, the report said.
The push follows the EU throwing its weight behind building European battery champions to close the gap with Asian countries on cell manufacturing, making billions available for carmakers and partners to compete with manufacturers including Japan’s Panasonic Corp. and China’s Contemporary Amperex Technology Co. Ltd.
“The EU has committed to the goal of becoming climate neutral by 2050,” said Bernd Schaefer, Chief Executive Officer of EIT RawMaterials, which has been mandated by the European Commission to manage ERMA. “The raw materials needs to facilitate this energy transition are massive, and Europe urgently needs to secure their supply.”
©2021 Bloomberg L.P.