Europe’s dependence on China for rare-earth magnets and other critical raw materials has become one of its most pressing strategic vulnerabilities. Even after temporary pauses in China’s export controls, the underlying challenge remains: China dominates global extraction, processing, and refining capacity, leaving Europe exposed to supply shocks that could disrupt entire industries.
When US President and Chinese President agreed to a brief trade truce that eased these restrictions, European companies—from Paris to Warsaw—felt momentary relief. But little has changed. Europe still imports nearly all the rare-earth magnets essential for electric vehicles, wind turbines, and defense technologies. The same applies to the lithium, cobalt, nickel, and graphite required for battery production. Most refining takes place outside EU borders, making Europe highly vulnerable whenever geopolitical pressures rise.
Building Resilience Before the Next Crisis
Temporary export relief is just a pause—not a solution. Europe must use this time to strengthen resilience across its raw materials supply chain. Diversifying suppliers, boosting domestic capacity, and integrating long-term risk management are essential. Without decisive action, the next supply crunch could strike harder than the last.
The EU’s Critical Raw Materials Act lays out ambitious benchmarks: extract 10%, process 40%, and recycle 25% of the bloc’s critical material consumption domestically. To support this, the European Investment Bank (EIB) is scaling up financing for extraction, processing, recycling, and new technologies—investing roughly €2 billion per year.
Recent EIB-backed projects offer a glimpse of what coordinated public and private efforts can accomplish: a copper recycling plant in Germany, lithium production facilities in Finland, and a major battery gigafactory in France. These investments not only strengthen domestic supply but also reinforce Europe’s industrial competitiveness.
Global Competition for Critical Minerals
While Europe prioritizes partnership-driven strategy, the United States has taken a more direct route. The US Department of Defense recently acquired a major stake in MP Materials, operator of America’s only rare earth mine. Backed by public funding and long-term contracts, the goal is clear: secure domestic supply chains and reduce dependence on China.
Tech giants like Apple have also started sourcing critical minerals domestically. Meanwhile, the US is expanding its influence abroad by taking stakes in Canadian mining companies—strengthening access to rare earths beyond its own borders.
Europe’s Partnership-Based Approach
The EU cannot remain passive in this global race. Yet instead of engaging in a subsidy war or resorting to direct government ownership—which could distort markets and violate principles of fair trade—Europe is building strategic alliances.
The EU has already established critical raw materials partnerships with 14 countries, including Canada, Chile, and Ukraine. These agreements promote responsible mining, transparent markets, and sustainable development.
The EIB is reinforcing these relationships, especially with countries like Australia—a global mining powerhouse. Following a recent visit, the EIB and Australian partners signed a declaration aimed at deepening cooperation on critical raw materials and accelerating joint initiatives.
Europe’s reputation for stability, reliability, and consistent rules is its strongest asset. These qualities help forge alliances with like-minded nations, creating a global network capable of counterbalancing market manipulation and supply disruptions.
Strategic Stockpiles, Joint Purchasing, and Circular Solutions
To shield against short-term shocks, Europe needs buffers. Strategic stockpiles and coordinated purchasing—key elements of the European Commission’s ReSourceEU initiative—can help stabilize markets and increase negotiating power. While they won’t eliminate all risk, they can significantly soften the impact of sudden shortages.
Circularity is another vital pillar. Modern recycling technologies can recover up to 95% of materials from end-of-life batteries, but scaling requires investment and clearer regulation. At the same time, research into substitutes for rare-earth magnets and cobalt-heavy chemistries must advance quickly to reduce dependency on imports.
The Road Ahead: Collective Action or Continued Vulnerability
Europe must move faster—mobilizing EU institutions, national governments, and industry leaders to invest across the entire value chain. Offtake agreements, long-term industrial commitments, and expansion of domestic production will be essential.
The EIB stands ready to support these efforts. But true resilience will come only from collective action. The cost of preparation may be high—but the cost of inaction in the next global shock will be far higher.
Europe has a narrow window to secure its strategic autonomy in critical raw materials. What it does now will determine whether it leads the next wave of clean energy and advanced manufacturing—or remains dependent on external powers for the building blocks of its economic future.
