Europe's Raw Material Crisis: Can It Break Free from China?

Europe's Critical Raw Material Crisis Deepens Amid China Dependence

Olivia Lazard: Indirectly, yes—because sulfur, which is produced in the Gulf region, is used in industrial copper processing, and copper is essential for both the defense industry and renewable energy production. Since the war began, global copper prices have risen, and they will remain volatile as long as the conflict continues. Over the long term, this will likely spur investment in production and processing, but in the short term, end consumers will have to brace for higher costs.

How dependent is Europe on critical raw materials—and which countries supply them?

Europe's Achilles' heel was identified and named 15 years ago: its reliance on China. Ninety percent of the so-called rare earth elements—17 chemical elements vital for wind turbines, electric vehicles, and defense technologies—come from China or are processed there. The same holds true for materials like copper, graphite, zinc, and manganese; at present, China's dominance in extraction and refining is nearly irreplaceable. Reducing these dependencies is extremely difficult, especially since China continues to expand its control over both mining and processing.

Why is that?

Europe wants to become more autonomous—not just from China, but also from Russia and the United States. Yet so far, we have failed to invest sufficiently in processing these raw materials. To change that, we would need to overcome decades of underinvestment. Meanwhile, we've lost parts of our industrial expertise, and we lack the critical mass in processing to make Europe an attractive partner for potential suppliers like Chile, Namibia, or Canada.

But Europe is also a more expensive location than China.

This brings us to the next challenge: energy prices in Europe are highly volatile. An energy system vulnerable to external shocks puts European industry at a severe competitive disadvantage and erodes its industrial base. To broaden its energy mix, Europe must rapidly expand capacity in geothermal, wind, solar—and yes, nuclear power.

At least policymakers in the EU have recognized the problem of declining competitiveness. The European Commission's latest measures all aim at deregulation.

Would deregulating the EU Emissions Trading System be a mistake? I would argue yes. But in the context of a comprehensive industrial strategy, direct market intervention by governments and EU institutions may well be justified. The United States under Donald Trump showed us what it takes: the U.S. government is actively building a domestic ecosystem for extracting and processing critical raw materials, establishing strategic reserves, and even setting minimum prices for certain commodities.

Does the EU have the resources and the political will to drive such a massive overhaul of Europe's economic order?

It's possible, but not easy. Europeans would need to act simultaneously across multiple fronts—mining, processing, recycling, and more. Some member states are already taking the lead: France, for example, is investing in lithium extraction. One crucial point: since Europe is warming twice as fast as the global average, our industrial strategy must also account for the continent's fragile ecosystems.

And what about the knowledge gap you mentioned?

Fortunately, Europe hasn't lost all its expertise. Companies like the Belgian chemical giant Solvay remain strategic assets for the entire EU. Europeans are also innovative when it comes to making extraction processes more sustainable—which could open new opportunities, given that critical mineral deposits exist in several EU countries, including Sweden, Portugal, and Germany.

So in the end, it's less a question of whether Europe can do this, and more a question of whether it truly wants to.

What is absolutely critical is that Europe's rearmament and reindustrialization must go hand in hand and be strategically planned. The EU's key defense players—Germany, France, Italy, Sweden, and Poland—must coordinate their procurement efforts. And this coordination cannot be limited to armaments alone; it must also deliberately boost production, processing, and innovation. Such tightly aligned cooperation would have the added benefit of accelerating the decarbonization of Europe's economy, making the EU less vulnerable to price shocks and coercive pressure.

Could recycling play a role in securing critical raw materials?

Yes—but the EU must act quickly, because China is already investing in recycling infrastructure. Here, too, the same rule applies: Europe has the expertise, but not enough industrial capacity to reach critical mass. Governments must now commit funding without delay to signal that long-term investments in recycling capacity will pay off. Otherwise, China will once again outmaneuver us in this field.

One issue we haven't yet addressed is Europe's dependence on the United States.

The EU can only reduce its vulnerability if it partners with like-minded countries such as Canada, Brazil, Mexico, or Japan. Seen this way, the procurement and processing of critical raw materials isn't just about an industrial strategy for Europe—it's about building a transnational alliance of allies. Nothing like this has ever been attempted before, but it is the only viable path for middle powers to avoid being at the mercy of great powers. Only together are we strong enough to help shape the rules of the game in the future.

Critical raw materials take a heavy toll on the environment—one reason their extraction and processing were outsourced to China in the first place. Are we now in a position to access these materials without harming the environment?

If Europe can still summon its innovative strength, this is precisely the kind of challenge where it should excel. That said, we won't be able to eliminate environmental impact entirely—there will always be some residual pollution, since truly clean rare earths won't exist for the foreseeable future. Unfortunately, the debate in Europe has so far been far too binary: on one side, those who prioritize rearmament at the expense of the environment; on the other, environmentalists for whom Europe's defense capabilities are not the top concern. The reality, however, is that the EU has no future unless it ensures both military and ecological security. This is not an either-or question. A strong industrial base won't help us if the environment and agriculture suffer as a result—and vice versa.