Burned by Russia, Germany seeks to lessen dependence on China

by Oliver Noyan

Germany’s dependence on Chinese raw materials is increasingly attracting the government’s attention as it continues, together with the EU, to work at full speed on freeing itself from Russian economic dependence. EURACTIV Germany reports.

In close cooperation with the EU, Germany wants to break away from its one-sided dependence on China, the government has said.

The country’s economy ministry is already hard at work as it is now working on a new raw materials strategy and aims to expand domestic extraction and diversify supply chains.

The new push for more strategic autonomy “concerns Russia on the one hand, where we need to break away from unilateral dependence on cheap energy, and China on the other, with a view to raw materials dependence”, Franziska Brantner, the parliamentary state secretary at the economy ministry, told EURACTIV.

In recent decades, the EU has become increasingly dependent on China for critical raw materials, with almost two in three resources it views as critical being extracted in the country.

“For too long, we have simply operated according to the principle of buying where it is cheapest, and these are often raw materials that come from China,” said Brantner.

Particularly worrying for the German government is the dependence in the first processing stage.

“Here, there are hardly any production sites independent of China. For many of the rare earths, this dependence is even almost 100%,” said Brantner.

However, the push for more strategic independence should not lead to protectionist tendencies because “we need globalisation – but a fair and sustainable one,” she added.

Germany is thus also banking on a diversification of the supply chains. Instead of maintaining the unilateral dependence on countries like China and Russia, the German government plans to expand cooperation with other non-Western states further and encourage German companies to invest in these third countries.

Brantner is thus heading to South America in mid-June, where she wants to promote stronger economic cooperation on renewable energies and raw materials.

Growing needs

According to World Bank estimates, demand for critical raw materials is expected to increase rapidly in the near future and grow by about 500% by 2050.

“Due to the exponential growth in demand, there is a risk that these existing dependencies will deepen even further,” EIT Raw Materials CEO Bernd Schafer told EURACTIV.

According to him, the EU must now step up its efforts to diversify supply chains and target the extraction of these critical raw materials across the bloc.

The European Commission has already taken some initiatives in this regard. This includes increased investments into the circular economy, which aims to reduce the demand for critical raw materials while at the same time recycling the raw materials already processed in products.

The principle is already enshrined in some EU legislation. For example, the Battery Regulation in its current form stipulates that a certain percentage of the weight of batteries must be recycled for raw material recovery.

A similar approach is also taken in the Ecodesign Directive, currently under revision. Rare earths, in particular, have a current recycling rate of less than 4%, which is why the European Commission sees a lot of room for improvement in raw material recovery, particularly in this area.

“It is also important to reduce the overall consumption of raw materials and to recycle more. There is still great potential here for many raw materials. We are committed to a European circular economy in this regard,” said Brantner.

Raw Materials Act

However, the big bang on the issue of raw material independence is still to come as the Commission is currently working on its own proposal for strategic independence in critical raw materials – the Raw Materials Act.

Although it is not yet known what shape the new legislative proposal will take, it is expected that many of its provisions will be modelled after the Chips Act. The Chips Act addresses similar problems concerning supply bottlenecks for semiconductors.

Among other things, the Chips Act envisages more than doubling the production capacities of semiconductors in Europe by 2030.

However, from Germany’s point of view, this approach cannot simply be transferred to the Raw Materials Act.

“The Commission must not focus here solely on the increased extraction of raw materials in Europe,” Brantner stressed. Rather, it should also focus on the diversification of supply chains and increased investment in third countries, she added.

“We need fair, competitive conditions, so if we apply high sustainability standards to the extraction of raw materials at home, then this must also apply to the imported raw materials. In addition, we need more tools for monitoring and tracking supply chains and incentives for diversification, efficiency and recycling,” Brantner also said.

*first published in: www.euractiv.com