The European Union’s new legislation on critical raw materials fails to reduce the continent’s dependence on Chinese rare earths and processed products, reports Baltimore Chronicle with reference to The Guardian.
European Commission President Ursula von der Leyen pledged back in March to support internal production in the EU to avoid strategic dependencies, particularly in battery manufacturing. However, many European component manufacturers face daily competition from cheaper Chinese alternatives.
Stefan Scherer, CEO of German company AMG Lithium, which produces lithium hydroxide for battery applications, criticized the 2024 EU Critical Raw Materials Act (CRMA), considered a key element in the EU’s strategy to reduce reliance on China. According to him, the law contains significant gaps and differs substantially from U.S. policies that encourage domestic sourcing.
“It unfortunately does not promote mining activities within Europe. This is the complete opposite of the United States, where a certain percentage of the materials used must be sourced locally,” Scherer told The Guardian.
He also pointed out the lack of financial disincentives for purchasing raw materials from outside the EU: “You don’t have to pay extra if you source outside the EU. So why change anything? You just continue buying from China.”
China enjoys nearly a 20-year head start in the sector and currently processes 60% of the world’s lithium on its own territory. It also controls 60% of global production of battery components, which places it in a dominant position on international markets.
AMG Lithium operates the first plant in the EU to produce lithium hydroxide, a key substance used in electric vehicle batteries. The facility, located in the former East Germany, opened last year and aims to produce 20,000 tons of lithium hydroxide annually — enough to supply components for 500,000 electric cars.
Still, the company warns of long-term threats posed by China’s market dominance. According to Scherer, European producers of critical raw materials need protection, as they require time to catch up with Chinese competitors.
He advocates for temporary tariffs or tax incentives to encourage the purchase of EU-produced lithium, cobalt, nickel, and graphite. He also suggests that Chinese investment in the EU could be acceptable — provided that such companies commit to hiring European workers.
Earlier we wrote that China cuts rare earth magnet exports to five-year low.