Volkswacht Bodensee - EU moves to break dependence on China for rare earths

China, the world's top producer of rare earths, in October announced new controls on exports of the elements used to make magnets crucial to the auto, electronics and defence industries.

The move rattled markets and snarled supply chains until China later said it would suspend the curbs for one year.

Already since April, Beijing had required licences for certain exports of the materials, hitting global manufacturing sectors.

"Europe is responding to the new global geopolitical reality," EU industry chief Stephane Sejourne said of the plans aimed at countering what he has likened to a raw earths "racket" run by Beijing.

The European Commission said it would unlock nearly three billion euros ($3.5 billion) to support strategic projects in mining, refining and recycling of the vital minerals and metals -- both within Europe and in partner countries.

The EU's executive also proposed the creation of a European Centre for Critical Raw Materials that will be the bloc's supply hub, modelled on Japan's state-run Japan Oil, Gas and Metals National Corporation.

Sejourne said the centre would have three main tasks: "Monitoring and assessing needs, coordinating joint purchases on behalf of member states, and managing stockpiles and deliveries to companies as required."

Brussels also wants to curb exports of scrap and waste from permanent magnets -- made from rare earths and widely used in industry -- as of next year, to boost recycling within Europe.

The EU also plans targeted restrictions on aluminium waste exports and may do the same for copper.

- Europe squeezed -

Two years ago, the EU adopted a law aimed at securing supplies of critical raw materials.

But the bloc finds itself squeezed between China's restrictions and the United States under Donald Trump, which is negotiating bilateral agreements on all fronts to secure its own supplies.

A study published Monday by the EU Chamber of Commerce in China said 60 percent of its members expected disruptions to their supply chains because of government-imposed restrictions, and 13 percent fear they may have to interrupt or slow down their production.

The European Commission also Wednesday updated its strategy for ensuring the EU's "economic security".

"Around the world, trade is being weaponized. Supply chains are under pressure," the EU's trade chief Maros Sefcovic told reporters in presenting the plan.

"Strategic choke points are turning economic dependency into political pressure, and this hits our companies every single day," he said.

The first such strategy was produced in 2023 as the bloc grappled with the harsh lessons from the Covid pandemic and Ukraine war that showed up the fragility of its supply lines.

But new diplomatic and geopolitical tensions, most strikingly a US administration willing to act aggressively on trade against its close allies, have prompted Brussels to revisit the rulebook.

The updated doctrine calls for easing the use of key tools already at the EU's disposal -- such as controls on foreign investment, export restrictions and diversifying suppliers -- and adding new ones if needed.

"Europe will continue to champion open trade and global investment, but our openness must be backed by security," Sefcovic said.

"This is why you will see more strategic and assertive use of our existing tools, the development of the new ones where needed, and stronger capacity to collect and share economic intelligence."

M.Betschart--VB