The global economy and technological value chains are increasingly reliant on critical raw materials such as copper, nickel, cobalt, lithium, graphite, and rare earth elements. Europe, however, faces structural vulnerabilities due to its significant dependence on external sources for both the extraction and processing of these materials. A substantial portion of raw material refining and integration into industrial value chains is concentrated in China, amplifying concerns over supply chain resilience, industrial competitiveness, and strategic autonomy. The latest competitiveness report by Mario Draghi underscores the extent of this dependency, emphasizing its ramifications for Europe’s energy transition, technology sector, telecommunications infrastructure, and defense capabilities.
Cobalt and the crisis in the Democratic Republic of Congo
Cobalt, a key component in lithium-ion batteries and high-performance electronics, is primarily sourced from the Democratic Republic of Congo (DRC), which accounts for over 70% of global production. However, the DRC is experiencing severe political instability, particularly in the Kivu region, where conflicts are exacerbated by external actors such as Rwanda, which seeks to control mineral supply chains. The volatility in the region raises concerns regarding long-term supply security and ethical sourcing. European stakeholders will likely need to monitor political developments and assess the viability of alternative sources to mitigate potential disruptions.
Lithium and China’s strategic positioning
Lithium, essential for electric vehicle batteries and energy storage, remains a focal point of geopolitical competition. China exerts considerable influence over the lithium value chain, not only through domestic production but also via strategic investments in Latin America. Notably, the Chinese firm Ganfeng Lithium has secured agreements in Argentina, including the “Mariana” project, further consolidating its role in global lithium supply. Given the projected exponential growth in lithium demand, European industry and policymakers must evaluate options for supply diversification, strategic stockpiling, and technological advancements in battery chemistry to reduce dependency.
Copper: Demand, shortages, and market dynamics
Copper, a fundamental metal for electrification and digital infrastructure, is expected to experience significant demand growth, with estimates from McKinsey suggesting an annual requirement of 36.6 million tons by 2031, against an anticipated supply of 30.1 million tons. This projected supply gap is likely to drive price volatility and intensify competition for access. China maintains a dominant role in both copper production and processing, reinforcing its leverage over global supply chains. European industry may need to engage in long-term contractual agreements and pursue strategic resource partnerships to safeguard access to this essential commodity.
Graphite and rare earths: The geopolitical significance of niche minerals
Graphite and rare earth elements are indispensable for high-tech applications, including semiconductor manufacturing, defense systems, and renewable energy technologies. China controls over 80% of global rare earth production and refining capacity, positioning itself as a central player in these supply chains. Recent geopolitical developments highlight efforts by various actors to secure alternative sources. The proposed U.S.-Ukraine deal for the extraction of critical minerals illustrates the growing intersection of resource security and geopolitical strategy. Europe’s position in this competitive landscape will depend on its ability to establish supply agreements with resource-rich nations while investing in domestic extraction and processing capabilities.
Diversification strategies and alternative supply sources
To enhance supply chain resilience, Europe must pursue a diversified approach, leveraging multiple regions for resource acquisition:
- Africa: Beyond the DRC, countries such as Zambia and Namibia possess significant reserves of cobalt and copper, presenting opportunities for long-term supply agreements.
- South America: Chile, Bolivia, and Argentina collectively hold vast lithium deposits. European investments in extraction and processing within these nations could counterbalance China’s influence in the sector.
- Europe: Domestic resource potential remains underdeveloped. Portugal and Finland, among others, possess lithium reserves that could contribute to reducing external dependency, provided regulatory frameworks support sustainable extraction.
The role of recycling and technological innovation
Recycling presents a viable pathway to reducing Europe’s dependence on primary extraction. The European Union has initiated research initiatives under Horizon Europe to advance recycling technologies for lithium-ion batteries and rare earth elements. Additionally, ongoing developments in alternative battery chemistries, such as sodium-ion batteries, may alter the long-term demand trajectory for lithium and cobalt.
Global supply and demand outlook
- Lithium: The International Energy Agency (IEA) projects a 500% increase in global demand by 2050, underscoring the urgency of securing diversified supply lines.
- Rare earths: With China controlling over 80% of production, supply chain resilience remains a priority for European industry and policymakers.
- Copper: Wood Mackenzie forecasts a doubling of copper demand by 2040 due to electrification trends, highlighting the potential for supply constraints and price volatility.
Policy and strategic considerations
- Research and development investments: Europe must prioritize technological innovation in resource recovery and alternative materials to mitigate supply risks.
- Strategic partnerships: Alliances with resource-rich nations such as Australia, Canada, and India could play a crucial role in reducing reliance on China.
- Domestic resource development: The EU’s Critical Raw Materials Act provides a regulatory framework for bolstering domestic production, though its effectiveness will depend on implementation efficiency and environmental considerations.