EU Proposes Legal Measures to Diversify Raw Material Supplies Away from China Under ReSourceEU Plan
The European Union is considering legally obliging companies to diversify their raw material supply away from China as part of its ReSourceEU strategy, aiming to protect against geopolitical supply shocks.
ReSourceEU is a €3 billion initiative designed to de-risk and diversify critical raw-material supply chains. The plan supports 25 to 30 strategic projects and introduces measures to curb scrap aluminium exports from the bloc and to recycle magnets for electrified vehicles.
A key component includes a €2 billion per year European Investment Bank-backed fund that will finance diversification efforts away from cheaper Chinese supplies. Examples of such projects include the Keliber lithium project in Finland.
The European Commission has indicated that it reserves the right to legislate to compel such diversification if company procurement heads do not present board-approved plans to reduce reliance on Chinese materials.
Immediate funding under ReSourceEU will initiate two projects: molybdenum extraction in Greenland and a lithium mine in Germany. Additional funds will support access to more expensive non-Chinese suppliers and create a raw materials platform for pooling orders and building stockpiles.
New restrictions on scrap exports, particularly on aluminium and potentially copper, are planned to come into effect in 2026.
China currently dominates the EU's magnet supply, which amounts to around 20,000 tonnes of permanent magnets annually, with about 17,000 to 18,000 tonnes sourced from China and roughly 1,000 tonnes produced within the EU.
Lithium demand is projected to increase approximately 60-fold by 2050. In 2020, over 78% of EU lithium needs were met by imports from Chile.
This initiative highlights concerns over China weaponizing raw-material supplies and is aligned with broader efforts by the US, EU, and UK to reduce dependency. Notably, the UK recently pledged £50 million to a similar diversification effort.
