Critical Raw Materials
By Dr. Bruno Surdel
(Expert, Center for Intl Relations, Poland)
Critical raw materials are a hot topic in global economics and geopolitics. They are essential to produce advanced technologies, energy transition, and national security. Access to them has become a priority for key global players: the United States, China, and the European Union.
China has consistently established itself as a dominant player in the extraction, processing, and supply of critical minerals for years. Meanwhile, Europe and the US increasingly view Chinese control over supply chains as a strategic threat, seeking to diversify their raw material sources and reduce their dependence on Beijing.
China’s domination currently controls approximately 60% of global rare earth production and processes over 85% of these raw materials. These materials are essential to produce magnets for electric motors, wind turbines, solar panels, mobile phones, and various military systems. Beyond rare earths, China has the largest processing capacity for critical minerals such as lithium (58% of global market), cobalt (70%), and graphite (90%), making Chinese production and exports crucial for the electric vehicle sector, including in the EU.
In recent years, China has also invested in developing mineral extraction in Chile and Argentina, entering into lithium supply agreements. In the Democratic Republic of the Congo, China controls approximately 70 % of cobalt mining. In Indonesia they are expanding nickel smelters, controlling approximately 75% of production, and supporting local projects to more effectively control supply chains.
China pursues an aggressive trade policy, using its position in the raw materials market as a tool for political pressure. Last December, Beijing blocked the export of rare earth metals such as gallium, antimony, and germanium, which are crucial for semiconductors. This was in response to US sanctions against the Chinese technology sector. Europe and the US fear that similar restrictions will be imposed on lithium and cobalt in the future, which could seriously impact battery production and the renewable energy sector.
The EU is pursuing an energy and digital transformation and is planning major investments in the European arms industry in response to the war in Ukraine and tensions in transatlantic relations. The success of all these projects depends on a stable supply of critical raw materials. In March 2024, the EU Council finally approved the Critical Raw Materials Act, which aims to strengthen Europe’s strategic autonomy. This document defines a list of 34 critical raw materials and 17 strategic raw materials, crucial for the defense and space industries. It also introduces benchmarks, according to which 10% of raw materials must come from domestic extraction, a maximum of 65% from a single external source, 40% must be processed within the EU, and 25% must be recycled.
Of particular concern is Europe’s dependence on external supplies of rare earth elements, 98% of which come from China. To minimize strategic risk, the EU is intensifying cooperation with other countries rich in these resources. Under a framework agreement (MoU), the EU established cooperation with the Democratic Republic of the Congo and Rwanda in 2023, which aims to ensure stable access to cobalt and tantalite. Currently, it sources approx. 68% of its cobalt from this region, which is rife with political chaos and ethnic conflict.
At same time, the EU is developing partnership with Chile and Argentina, world leaders in lithium production, and with Kazakhstan and Uzbekistan in the field of rare earth elements. It is particularly important to strengthen the European value chain so that most processing takes place within the EU rather than in Asia.
The EU has also initiated the Critical Raw Materials Club, which brings together democratic states interested in curbing China’s global dominance. These partnerships also include cooperation within the G7, where work is underway on mechanisms for the joint purchase and distribution of raw materials. The EU is also establishing dialogues with India, Japan, and South Korea to exchange technology and mutual investments in the raw materials sector.
In the US, President Joe Biden’s Inflation Reduction Act (IRA) provided tax breaks for domestic production of critical raw materials. Since the inception of Trump’s new administration, Washington has pursued aggressive policies with goals like those in Europe: diversifying raw material supplies and limiting China’s influence. A key element is a new raw materials agreement, including negotiations with Ukraine regarding controversial joint development of its mineral resources. The Trump administration is conditioning continued military support for Ukraine on meeting specific economic commitments. The agreement is expected to establish a special investment fund, to which Ukraine would contribute 50% of future revenues from lithium, cobalt, oil, and natural gas extraction. This is intended not only to support Ukraine’s reconstruction but also to ensure the US’ long-term access to strategic raw materials. However, it’s currently impossible to assess whether the public will be fully aware of the details of this “deal.”
The Trump administration argues that American economic involvement would constitute a kind of security “guarantee” for Ukraine following a ceasefire and a potential peace agreement with Moscow. However, such an agreement could not only end the devastating hostilities but also force Kyiv to accept the current territorial line and lose approximately 20% of its territory.
Greenland, which is moving towards independence from Denmark, is also among the most important areas of interest to the US. President Trump has consistently expressed interest in the island’s strategic importance, rich in rare earth elements, fossil fuels, and other valuable natural resources. Despite the previous failure of attempts to purchase Greenland, in his latest address to Congress, he declared his support for its independence and his pursuit of a close union with the US in the long term.
The world’s largest island is strategically important to Washington not only for its natural resources but also because of the melting Arctic ice, as it opens potential new trade routes. Russia is the most advanced country in terms of developing its Arctic regions—civilian infrastructure and massive investments in Arctic gas extraction. For years, Moscow has also been expanding military bases and capabilities in the region on a large scale. Furthermore, China, officially recognises itself as a ‘circum-Artic’ state and is actively trying to gain footholds and influence in the Arctic countries.
The US administration is also seeking to intensify cooperation with Australia and Canada to diversify rare earth metals supplies, while also accelerating development of its own mining infrastructure. However, in Canada’s case, the US is attempting to ruthlessly enforce solutions favorable to itself.
In this global puzzle, Poland, thanks to its copper resources, can turn out to be a key element of Europe’s raw materials strategy. KGHM Polska Miedz SA is one of the world’s largest producers of silver and copper, which is used to produce electrical cables, components for automotive and defense industries, and renewable energy technologies. It could become a major supplier and could be a strong asset in this eastern European country’s efforts to maintain the US military presence on its soil. Both EU and Poland must not only diversify sources of raw materials but also build long-term risk reduction mechanisms, like strategic raw material reserves. The EU could become a global leader in developing innovative methods for recovery and reuse of rare earth elements, allowing for greater resilience to global resource shocks.
Of course, it’s also necessary to monitor the dynamically evolving strategies of the US and China and respond to new export control mechanisms, subsidies, and market regulations. Adapting policy to these challenges requires active collaboration with the private sector and research institutes that can provide real-time analyses and recommendations. — INFA