EU weighs legal measures to reduce reliance on China for rare earths and critical raw materials

The European Commission is considering compulsory measures to reduce the continent’s dependency on China for critical raw materials including rare earth elements. The announcement follows mounting concerns over China’s use of export controls as a tool in economic and geopolitical negotiations. Industry Commissioner Stéphane Séjourné stated that while the immediate emphasis is on encouraging industries to diversify supply chains, the EU reserves the right to legislate mandatory diversification should voluntary efforts prove insufficient.

The Commission has unveiled a €3 billion strategy named ReSourceEU designed to de-risk and diversify supply chains in crucial sectors. With support for up to 30 strategic projects across Europe, the initiative aims to bolster domestic capacity and reduce exposure to unpredictable market shocks. The strategy will involve funding new ventures, including immediate backing for a molybdenum extraction project in Greenland and a lithium mine in Germany. The European Investment Bank is expected to commit €2 billion annually, providing loans and private debt facilities to support this transition, dwarfing the scale of similar British initiatives.

Key features of the programme also include new regulations to retain valuable scrap aluminium and, if necessary, copper within the bloc. The Commission has outlined plans for a ‘raw materials platform’ to pool orders from European firms and develop joint reserves to cushion supply disruptions. Support is also proposed for companies sourcing critical materials from suppliers outside China, even at higher costs, to enable a resilient and independent supply network.

Figures from EU officials reveal the scale of current dependency, with the bloc importing approximately 20,000 tonnes of permanent magnets annually, of which over 85 percent come from China. Only a small portion is produced within Europe. The vulnerability of this arrangement was highlighted most recently when China temporarily imposed restrictions on rare earths as part of a tariff dispute, demonstrating Beijing’s leverage over international supply chains.

Demand for certain critical elements, notably lithium, is projected to surge nearly sixtyfold by 2050. While Chile supplied the majority of Europe’s lithium in 2020, China’s pivotal role in processing and supplying batteries keeps the EU exposed to potential external shocks. The continent recently constructed its first lithium hydroxide facility in Germany, underscoring the necessity for continued investment in local processing and extraction capacity.

EU leadership insists the drive towards open markets remains a priority, yet repeated disruptions highlight the necessity of establishing secure and diversified supply chains. The Commission’s message to industry leaders is explicit—diversification plans must be communicated and enacted imminently, or the sector could face binding legislation compelling action. The new strategy marks a clear response to the urgent need for European strategic autonomy in raw material sourcing.