EU Unveils €3bn Strategy to Diversify Critical Raw Materials Supply Chains and Reduce Dependence on China
The European Union is taking significant steps to reduce its heavy reliance on China for critical raw materials, particularly rare earth components crucial for technologies like car batteries. Industry commissioner Stéphane Séjourné indicated that the EU is considering legal measures to compel industries to cut purchases from China, aiming to insulate Europe from supply chain vulnerabilities.
In this context, the European Commission has unveiled ReSourceEU, a €3 billion strategy designed to de-risk and diversify supply chains for essential raw materials. The plan includes funding for 25 to 30 strategic projects, with initial implementation starting on two projects: molybdenum extraction in Greenland and a lithium mine in Germany.
Key elements of the strategy involve new regulations to prevent scrap aluminium from leaving the EU and to facilitate the recycling of magnets used in automotive batteries. A €2 billion annual fund, backed by the European Investment Bank, will support efforts to diversify suppliers. The Commission also reserves the right to legislate should industries fail to sufficiently diversify, by obliging a portion of supplies to come from non-Chinese sources.
Additionally, proposed 2026 restrictions aim to limit exports of scrap metals, including copper if necessary. The initiative includes the creation of a raw materials platform to pool orders and build joint stockpiles, and financial assistance to offset the additional costs of sourcing from more expensive non-Chinese suppliers.
Europe currently depends heavily on China for rare earth magnets and lithium materials. Approximately 20,000 tonnes of permanent magnets are bought annually, with 17,000–18,000 tonnes sourced from China, about 1,000 tonnes produced within the EU, and the remainder from other countries. Demand for lithium is anticipated to increase nearly sixtyfold by 2050, underscoring the urgency of addressing supply vulnerabilities. The strategy offers detailed insights into these dependencies and aims to establish a more secure and diversified supply chain for the continent.
