Fee President Ursula von der Leyen introduced a brand new legislative proposal, the Vital Uncooked Materials Act, to deal with the evolving dependency on China in the case of uncooked supplies and guarantee extra resilient provide chains.

The proposal was introduced as a part of von der Leyen’s annual State of the Union tackle on Wednesday (14 September).

Whereas the Fee already famous on a number of events that it’s engaged on a legislative proposal to spice up autonomy and resilience within the space of uncooked supplies, it’s the first time that the principle pillars of the brand new strategy had been outlined.

“We should keep away from turning into dependent once more, as we did with oil and fuel. […] We are going to determine strategic initiatives all alongside the provision chain, from extraction to refining, from processing to recycling. And we’ll construct up strategic reserves the place provide is in danger. That is why at this time I’m saying a European Vital Uncooked Supplies Act,” she added.

Chinese language dependency

Whereas von der Leyen didn’t point out China immediately in her speech, the message was clear. “The not-so-good information is – one nation dominates the market,” she stated.

Lots of the uncooked supplies that the European Fee deems important are primarily mined in China. This holds very true for uncommon earths, the place the provision threat is taken into account by the Fee to be the best.

Round 90 % of those uncommon earth metals are at present mined by China – rendering the EU largely depending on the Asian large concerning this important useful resource.

“Lithium and uncommon earths will quickly be extra necessary than oil and fuel,“ von der Leyen emphasised.

Because of the inexperienced and digital transition, the demand for important uncooked supplies is predicted to rise dramatically. Based on the Fee, demand will enhance by 500% by 2030. Different projections by the World Financial institution recommend that the worldwide demand may even enhance 5-fold by 2050.

Tackling dependencies

Among the measures, geared toward tackling current dependencies and guaranteeing diversification of provide chains, might be modelled after a legislative proposal that handled related issues: the Chips Act, which seeks to spice up semiconductor manufacturing capacities for the EU. 

“We now want to copy [the Chips Act’s] success,” von der Leyen stated.

This might entail the relief of a number of the state support guidelines underneath its primary subsidy scheme, the Necessary Tasks of Widespread European Pursuits (IPCEI), to extend funding within the mining sector – one thing that has already been proposed for the Chips Act.

To spice up funding, von der Leyen additionally introduced a rise within the monetary participation of the IPCEI and the creation of a brand new European Sovereignty Fund.

Nonetheless, the upcoming Vital Uncooked Materials Act won’t solely cope with securing provides. It additionally goals to minimize the dependency on China in the case of refining uncooked supplies.

One working example is lithium, which is a key part of batteries and thus important for the inexperienced transition. Whereas solely round 9% of the world’s lithium is mined in China, round 60% is refined there, leaving the EU largely depending on China even in areas the place there’s a multitude of suppliers of the uncooked materials itself.

“We are going to determine strategic initiatives all alongside the provision chain, from extraction to refining, from processing to recycling. And we’ll construct up strategic reserves the place provide is in danger,” von der Leyen said.

Securing provide chains by means of commerce

One other pillar of the Fee’s strategy to safe provide chains is thru technique of commerce with like-minded democracies like Chile, Mexico, New Zealand, Australia and India.

This emphasis on diversification of provide chains as an alternative of pushing for a extra protectionist strategy was particularly welcomed by consultants.

“I discover it telling that von der Leyen positioned a powerful emphasis on the function of commerce relationships and increasing the portfolio of strategic partnerships,” André Wolf, divisional head on the Centre for European Coverage, instructed EURACTIV.

“This might maybe be interpreted as a sign that the Fee is transferring a bit away from the thought of renationalising the commodity sector as a threat hedging software,” he stated.

[Edited by Nathalie Weatherald]