Just like this shelf of cheese, critical mineral supplies into the EU don’t look safe at all. Pic via Getty Images.

The EU needs domestic critical minerals supply so the wheels don’t fall off

Mining

August 14, 2023 | Cameron Drummond

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Blessed are the cheesemakers

Truth. And so Europe was undoubtedly thrust into a state of shock recently after hearing that 74 yr-old cheese casaro Giacomo Chiapparini was crushed to death under the wheels of his own parmesan.

The cheese wheels – weighing in at 40kg each – fell in their thousands from the top of his warehouse after a shelf broke and it took firefighters 12 hours to retrieve Chiapparini’s body underneath his beloved Grana Padano.

But that’s not the only shock lately for Europe – it’s facing a domestic raw material production crisis for a range of critical minerals it requires for EVs, clean energy production and other technologies.

Moves such as China’s recent export restrictions of its monopoly on gallium and germanium – critical components in semiconductor chips – and high global demand have sparked the EU to hastily pass legislation to make its region more self-reliant in the mining, processing and recycling of such minerals.

34 of them in fact. The EU’s Critical Raw Materials Act was enacted earlier this year to secure future supply for downstream processing and manufacturing of critical metals and minerals as it largely imports most elements from third-party countries outside the EU. Let’s find out why:

Critical minerals the EU has mandated for domestic production and processing capabilities. Source: European Union.

Don’t let the wheels fall off

European mining is old. Centuries-old. Yet nowadays, its homegrown mining is largely based on fossil fuel extraction and traditional mining of meagre amounts of gold and silver – importing most other minerals that are increasingly in demand as we pivot to net-zero emissions technologies.

Past colonialism by the majority of European powers – where they pillaged natural resources and brought them back home – has manifested into the necessary importation of a range of raw materials from places like China, Africa, Russia and more for far too long.

Thus creating a dependency on third-party nation-states outside of the EU for high-demand critical minerals.

It may sound cheesy to say this, but this lack of domestic critical mineral production could mean Europe gets economically crushed by its past successes.

Europe is set to become the global leader in EV penetration. Source: Citi.

Basically, if the EU doesn’t want the wheels to fall off its prestigious US$156bn (6.24% of total EU exports) car manufacturing sector and clean energy targets, it’s going to need to shore up stable supplies of these minerals in-house, otherwise OEMs are going to set up shop elsewhere.

The good news is, they’re actually doing something about it.

EU critical minerals mandate

The Raw Materials Act sets these benchmarks along the strategic raw materials value chain and for the diversification of the EU supplies for:

• at least 10% of the EU’s annual consumption for extraction
• at least 40% of the EU’s annual consumption for processing
• at least 15% of the EU’s annual consumption for recycling
• and no more than 65% of the EU’s annual consumption from a single third country

Lofty goals, as currently, China supplies the EU with 80% of its REEs and imports high percentages of other strategic minerals used in battery manufacturing, such as lithium, nickel, copper and cobalt.

In March 2023, the European Union also proposed the Net Zero Industry Act, which aims to meet 40% of its needs for strategic net zero technologies using domestic manufacturing capacity by 2030.

These technologies explicitly include battery and storage, and for batteries, the aim is for nearly 90% of the European Union’s annual battery demand to be met by EU battery manufacturers, with a combined manufacturing capacity of at least 550GWh in 2030, in line with the objectives of the European Battery Alliance.

“The EU’s demand for base metals, battery materials, rare earths and more are set to increase exponentially as the EU divests from fossil fuels and turns to clean energy systems which necessitate more minerals,” the European Council says.

“The EU green transition will require the build-up of local production of batteries, solar panels, permanent magnets, and other clean tech. Abundant access to a range of raw materials will be needed to address the corresponding demand.”

Ergo, Europe is hungry to mine. And lucky for EU, there’s a bunch of ASX-listed explorers and mine developers looking to feed into its domestic supply chain.