EU Plans to Legally Mandate Industry Diversification from Chinese Raw Materials
The European Union is considering legally requiring industries to reduce their purchases of raw materials from China. This initiative is part of a broader strategy to protect Europe from geopolitical risks associated with critical materials, following calls from Commissioner Stéphane Séjourné.
The plan, known as ReSourceEU, is a €3 billion strategy aimed at de-risking and diversifying EU supply chains for critical raw materials. It funds 25 to 30 strategic projects and introduces rules to limit the export of scrap aluminium from the bloc, as well as recycling magnets used in car batteries. To further support diversification efforts, a €2 billion-per-year fund backed by the European Investment Bank will provide financing for projects steering away from Chinese supplies.
The European Commission has reserved the right to enforce legislation obliging companies to diversify a certain share of their supplies if the industry fails to act voluntarily. Procurement chiefs within companies will be required to report their diversification plans to their boards.
Two projects are being fast-tracked under this strategy: a molybdenum mine in Greenland and a lithium project in Germany. The plan also includes establishing a raw materials platform to pool orders and build stockpiles. New restrictions on scrap exports, including possibly copper scrap, could be introduced by 2026 to help curb material leakage.
Europe's demand for magnets is approximately 20,000 tonnes annually, with 17,000 to 18,000 tonnes sourced from China, about 1,000 tonnes produced within the EU, and the remaining supply coming from other countries.
This move follows China's recent threats to expand controls on rare earth exports, highlighting Europe's vulnerability to supply disruptions amid its efforts to reduce dependence on Beijing for critical minerals.
