Europe presents itself as being in the midst of a historic industrial reset. Climate neutrality, strategic autonomy, energy transition, reindustrialisation, and resilience dominate policy speeches and regulatory agendas. Yet beneath this ambitious language sits a structural weakness that remains largely absent from public debate, insufficiently absorbed by politics, but clearly understood by serious investors: Europe does not control enough of the processing systems its industrial future depends on. Refining, chemical conversion, alloying, and intermediate processing for critical materials remain heavily concentrated outside the continent—and the implications reach far beyond economics.
Why Processing Defines Industrial Power Today
Industrial sovereignty has always rested on control of essential inputs. In the twentieth century, that meant oil, gas, and heavy infrastructure. In the twenty-first, sovereignty is defined by complex value chains. Copper, nickel, lithium chemicals, graphite, tungsten, and advanced intermediates are the arteries of electrification, digitalisation, renewable energy, modern mobility, and defence capability.
Europe possesses world-class engineers, manufacturers, automakers, and research institutions. But if the refined materials that feed these industries must be imported, then industrial power flows outward, even if factories and jobs physically remain on European soil.
Europe prides itself on leadership in renewable energy and electrification—and with reason. It moved early on climate policy, developed strong capabilities in wind power and grid technologies, and is now racing to anchor electric vehicle manufacturing at home.
Yet electrification brings new dependencies. Expanding grids means surging demand for copper. Scaling electric mobility increases reliance on nickel and graphite. Energy storage depends on battery-grade lithium and processed intermediates. At industrial scale, most of these materials still come from Asia, with China at the centre of the value chain.
The uncomfortable reality is that Europe’s clean energy transition is increasingly built on externally processed materials, priced and supplied within ecosystems Europe does not control.
This dependency has real-world consequences. When a continent relies on external processing hubs, its cost base becomes vulnerable to another power’s industrial strategy. Price volatility is not reduced—it is imported. If export conditions tighten, subsidies shift, or supply is redirected toward domestic priorities, Europe feels the impact immediately through higher costs, delayed projects, and weakened competitiveness.
For European manufacturers already grappling with high energy prices, regulatory complexity, and global competition, this dependence compounds disadvantage rather than relieving it.
Geopolitics: A Lesson Europe Has Already Learned
Europe has experienced firsthand how energy dependence can transform into geopolitical leverage. The lesson from Russian gas should have been clear: dependencies are never purely economic. They are political assets waiting to be activated.
Reliance on Chinese processing is different in structure, but the logic is similar. An industrial system dependent on foreign refining capacity must constantly negotiate its autonomy. Strategic decision-making becomes constrained, and Europe increasingly builds its industries on imported strategic oxygen.
Investors understand this dynamic clearly. Capital allocation in manufacturing, energy infrastructure, and advanced technology depends not only on incentives and market size, but on supply-chain resilience. If key intermediate materials remain beyond European control, risk premiums rise.
Governments can subsidise factories. They cannot subsidise sovereignty if the inputs remain concentrated elsewhere. Industrial credibility, therefore, becomes as important as climate ambition or technological vision. Sovereignty is not declared—it is engineered, in smelters, refineries, chemical plants, and recycling facilities built at meaningful scale.
The consequences extend directly into defence and security. Europe’s military modernisation relies on tungsten, specialty alloys, electronic metals, and advanced materials. Modern defence systems are not built on steel alone; they depend on complex material flows and precision components.
If these flows are tied to foreign processing hubs, parts of Europe’s defence capacity are indirectly dependent as well. Security autonomy cannot exist without material autonomy.
The Risk of Becoming an Assembly Economy
There is also a long-term employment and economic dimension. Europe’s historical strength lay in integrated value chains that supported skilled jobs, innovation clusters, and industrial communities. If downstream manufacturing remains while midstream processing continues to migrate abroad, Europe risks hollowing out its industrial core.
Value capture shifts elsewhere, productivity anchors weaken, and the continent gradually becomes a sophisticated assembly economy rather than a full-spectrum industrial power. Over time, this translates into weaker wages, slower innovation, and a more fragile economic foundation.
This leads to a fundamental question: is Europe truly serious about industrial sovereignty—or only rhetorically so? Real sovereignty requires accepting uncomfortable choices. Processing facilities are capital-intensive, politically sensitive, and complex to permit, far less glamorous than gigafactories or clean-tech showpieces.
Yet Europe cannot outsource processing to Asia, claim environmental virtue, and simultaneously declare independence. You cannot be sovereign using someone else’s refineries. Sustainability without sovereignty is neither strategically sound nor morally superior.
What a Real Strategy Requires
This does not imply isolationism or industrial nationalism. It requires deliberate capacity-building in copper refining, nickel and battery chemical processing, strategic metals, and large-scale recycling. It demands financial instruments, risk-sharing mechanisms, and long-term policy certainty that match ambition with execution.
It also means engaging partners—Canada, Australia, Norway, parts of Latin America and Africa—not only as raw material suppliers, but as genuine processing allies in diversified industrial systems. Markets alone will not solve this problem without a shift in Europe’s risk appetite toward industrial capital formation.
Europe still has time—but not decades. China’s dominance is consolidating, not slowing. The United States is responding forcefully with state capital and industrial legislation. If Europe hesitates, it risks locking itself into a permanent structural disadvantage that becomes increasingly difficult to reverse. Supply chains, once hardened, do not easily reroute.
Industrial sovereignty is not an abstract idea. It is measured in tonnes of refined copper, nickel sulfate capacity, processed graphite, tungsten chemistry, and recycling infrastructure that actually exists. Europe often speaks of future leadership. But in this domain, leadership will not come from speeches—it will come from factories.
If Europe wants to remain an industrial continent, it must accept a simple truth: in the 21st century, power belongs not only to those who innovate or regulate, but to those who refine. Whoever controls the midstream controls the future. Europe still has a choice—but choices delayed eventually become conditions imposed.
