Council of theEuropean Union
Brussels, 4 August 2022
(OR. en)
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COMPET 635
MI 600IND 308
NOTE
From:
To:

Trio Presidency
Working Party on Competitiveness and Growth (High Level)

Subject:

Criticial raw materials

Delegations will find in Annex a Trio Presidency note on Critical raw materials, in view of themeeting of the Working Party on Competitiveness and Growth (High Level) on 7 September 2022.

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ANNEX
Note on Critical Raw Materials
Securing the EU’s access to critical raw materials (“CRM”) is essential for the industrial transitionof strategic economic sectors such as e-mobility, aerospace, renewable energies, digital industries,
health, agriculture, security and defence. Currently, the supply for many CRMs is heavily
concentrated in one or only a few countries, among them potentially unreliable partners. For
example, China supplies above 90% of EU refined rare earths or magnesium.
Such concentration bears risk for the EU security of supply as supply of CRMs can be used as ageopolitical leverage, for instance through export restrictions. For example, in 2010, China
implemented an embargo on rare earths export against Japan and the United States. More recently,
Indonesia has implemented an export ban regarding nickel. In addition, several raw materials are
subject to export control restrictions and specific tariff barriers or quotas.1
Additionally, global competition for resources will intensify in the near future as global demand
will drastically surge. To reach the goals of the Paris Agreement, the world needs 42 times morelithium, 25 times more cobalt and 7 times more rare earths in 2040 compared to 2020 (IEA 2021
report). To meet the European Green Deal and REPowerEU’s objectives, the EU needs will
increase as follows by 2050 (compared to 2020): 35 times for lithium; 3 times for cobalt; between 6and 26 times for rare earth elements (KU Leuven study2).

1 Methodological note to the Inventory of Export Restrictions on Industrial Raw Materials(oecd.org)
2 https://eurometaux.eu/media/jmxf2qm0/metals-for-clean-energy.pdf
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Crucially, global supply is not expected to rise accordingly, as shown by recent analysis by theInternational Energy Agency3 or KU Leuven4. Such gaps between future supply and demand areforecasted for example for lithium and rare earths, which is likely to lead to increased prices (forexample, the price of lithium has already increased by almost 10 times over the last 2 years and theprice of the rare earth neodymium by 3 times5) as well as potentially to shortages.
The Commission has been working to mitigate these strategic dependencies and secure EU accessto CRMs, mostly by implementing actions laid out in the 2020 Action Plan on CRMs6. In February2022, the Commission published a staff working document7: “EU strategic dependencies andcapacities: second stage of in-depth reviews”, building on the more general analysis on strategic
dependencies from May 20218.
Diversification of the supply chains is essential to preserve supply of CRMs. International
cooperation is key in this regard. The Commission continues to negotiate strategic partnerships on
raw materials value chains with resource rich and like-minded countries. Last year, the partnerships
with Canada and Ukraine were concluded, and more partnerships are currently under negotiation.
Via the Minerals Security Partnership, the EU is cooperating with the US and like-minded partners9
to secure CRMs and to raise environmental, social and governance standards as well as circularity
and innovation.

3 https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions
4 https://eurometaux.eu/media/jmxf2qm0/metals-for-clean-energy.pdf
5 Deutsche Rohstoffagentur, Preismonitor Mai 2022, https://www.deutsche-rohstoffagentur.de/DERA/DE/Aktuelles/Monitore/2022/05-22/2022-05preismonitor.pdf;jsessionid=DE0E1F10E2FB3B27F8B7D28A5C700E01.2_cid284?__blob=publica
tionFile&v=2
6 https://ec.europa.eu/docsroom/documents/42849
7 https://ec.europa.eu/docsroom/documents/48878
8 https://ec.europa.eu/info/sites/default/files/strategic-dependencies-capacities.pdf
9 In the US MSP framework, initial partners are Australia, Canada, France, Finland, Germany,Japan, Norway, Republic of Korea, Sweden, the United Kingdom, and the United States, as well as
the European Commission, acting on behalf of the European.
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3ENTo build up the value chains for CRMs, large investments are needed. To de-risk and crowd-in
private investments where needed, the Commission has held regular workshops with promotionalbanks (EIB, EBRD etc.) and continued its work with the Clean Technology Materials Task Force.
The industrial alliance on CRMs (ERMA) has published a report on permanent magnets, a major
application for rare earths, and compiled a list of 14 bankable projects in the EU along the entire
value chain, that, if implemented could provide 20% of European demands in 2030.
The Russian aggression against Ukraine has highlighted these strategic dependencies even moreacutely. It has served as a warning of even larger vulnerabilities for access to key resources that theEU may face in the future. The reliance on China for several CRMs is even larger than for Russian
gas and oil.10. Additionally, higher energy prices have a much stronger impact on the EU raw
materials producers that hampers their competitiveness. It also forces the downstream sectors toincrease their imports when European supply can no longer meet Member States demand.
Additionally, increased energy prices have a stronger impact on the EU raw materials producers
compared to other countries, further impacting our competitiveness. However, higher energy prices
are a global phenomenon that impacts even China. For instance, in autumn 2021 and winter 2022,
higher gas and electricity prices led the producers of magnesium to curtail or stop theirproduction11. To ensure the continuity of our value chains, we need to strengthen our strategy of
securing critical raw materials supplies.
Therefore, the Heads of States or Government called on the European Commission in the VersaillesDeclaration (11 March 2022) to secure EU supply of CRMs by means of strategic partnerships,
exploring strategic stockpiling and promoting a circular economy, resource efficiency andsubstitution of critical raw materials by less critical inputs in manufactured products. As a response,the European Commission announced in the REPowerEU communication (18 May 2022) that it
will intensify work on the supply of CRMs and prepare a legislative proposal12.

10 For example, China supplies 86% of the world’s rare earths and 89% of the world’s magnesium,and supplies more than 90% of European demands of both.
11 Furthermore, China's power grid is deficient and has suffered many interruptions. In theframework of Winter Olympics Game in 2022, China decided to cut production from many
greenhouse gas emitting industries, including raw materials and metals industries.
12 An important aspect will be the links with other proposals such as SMEI, Waste Shipment
Regulation, Duty of Care, Sustainable Products Initiative etc
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The objective will be to strengthen the EU’s monitoring capacity and to reinforce the EU’s value
chain through the identification of CRMs mining, refining, processing or recycling projects in theEU’s strategic interest, based on a classification of raw materials with a clear methodology.
A recent discussion paper from Denmark suggest a typology for dependencies with different policy
options for different types of dependencies. The regulatory proposal could be a useful way tolegally define criteria for such a more focused list and consider possible specific measures for theraw materials covered by it.
The Commission will also ensure in its initiative a high level of environmental protection, including
projects that promote a circular economy, resource efficiency and substitution. Sustainability is thedriver of the EU’s green and digital transition and climate neutrality objectives. Enhancing
recycling, research and innovation for substitution, increased resource efficiency, circular economy
measures to boost uptake of secondary raw materials will be essential. We need to ensure that new
activity along the entire CRMs value chain is done as sustainably as possible.
In the medium- to long-term recycling will be a decisive factor in contributing to the EU’s supply of
CRMs. It is therefore important to ensure a common EU framework on recycling and the re-use of
raw materials when products have reached the end of their lifespan. The massive deployment ingreen energy in the next years, as outlined in REPowerEU, means we will have to rely mostly on
primary raw materials in the short- to medium term.
Given that the initial impetus for the intensification of the work on CRMs came from the Heads ofState and Government in the Versailles Declaration, it is crucial that the High Level Group forCompetitiveness and Growth provides additional impulses in a meaningful and constructive way.
To tackle these strategic dependencies, several Member States have reacted with domestic
measures, for example by increasing monitoring capacity or setting up their own funds to support
projects designed to increase the supply of CRMs. This group could provide a good setting todiscuss what can be done and to further coordinate the European answer to this crisis. Together, weare better able to do what it takes to secure Europe’s future supplies for CRMs.

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Points for discussion:–

What are the key bottlenecks for availability of critical raw materials in your Member State?
What actions are you undertaking/do you intend to undertake to ensure the recycling, theuptake of recycled content, and re-use of products which have reached the end of theirlifespan?

–

Which specific regulatory measures could be helpful to secure EU supply of CRMs? Are
there any particular areas you would like to see covered by the regulatory proposal on rawmaterials?

–How should the regulatory proposal on raw materials assure consistency with other relevant
regulatory proposals that are being negotiated or will be negotiated in the near future?

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