EU's move to decouple from China's minerals supply may aggravate its economic woes
Despite the ongoing energy crunch across Europe, European Commission President Ursula von der Leyen recently proposed new legislation to reduce the European Union (EU)'s on supply of critical minerals including rare earth metals and lithium from China.
"We will identify strategic projects throughout the supply chain, from extraction to refining, from processing to recycling. And we will build up strategic reserves where supply is at risk. This is why today I am announcing a European Critical Raw Materials Act," said Von der Leyen in the annual State of the Union address, said Ursula von der Leyen, Global Times reported.
However, industry experts have opposed the move by Von der and said that restructuring will take time and raise costs which will, in fact, aggravate the ongoing inflation in Europe amid the ongoing energy crisis.
The industry experts also believe that the move by EU may also increase the cost of achieving Europe's green targets amid the deepening energy crunch.
"The consequences of decoupling from Russian energy imports are already dramatic for citizens and industries in Europe...if we now add raw materials sourced from China, the consequences will be even more severe," Global Times reported, quoting Stephan Ossenkopp, a Berlin-based expert associated with the Schiller Institute, an international think tank.
As per a report from the European Raw Materials Alliance, China exports about 16,000 rare-earth permanent magnets to Europe each year, representing approximately 98 per cent of the EU market.
In another statement, a manager of a state-owned rare-earth enterprise surnamed Yang based in Ganzhou, East China's Jiangxi Province said, "Rebuilding supply chains of rare earth will take years, especially in the separation process," opposing the legislation proposed by the European Commission President.
Notably, the bilateral trade between China and the EU exceeded a record high of USD 820 billion in 2021 and in the first half of this year, trade between the 27 EU members and China was 413.9 billion euros, according to Global Times.
Rare earth elements are produced in a handful of countries and play an essential role in technology, from microchips to speakers to X-ray imaging China continues to dominate the rare earth elements around the world, while the west is pushing towards self-reliance in the procurement of scarce metals and minerals.
Other rare earth-producing countries like Australia have also been seeking to boost the resilience of their supply chains, particularly since the start of 2020.