A new study by the Office for Technology Assessment at the Bundestag (TAB) analyzes structural dependencies on rare earths and shows ways out for a more resilient supply. These raw materials are found in almost everything that drives digital and green transformation: from powerful permanent magnets in offshore wind turbines and electric motors to hard drives, fiber optic networks and cutting-edge military technology such as fighter jets and guided missiles. As a result of digitalization, decarbonization and demographic change, demand is increasing sharply. But the geographical distribution of reserves reveals a dilemma, as around half of the world’s reserves are located in China.
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According to the paper, the Asian dominance in technologically sophisticated refining and further processing is even more serious than pure mining production. Here the People’s Republic controls around 90 percent of global value creation.
A look at import data shows how vulnerable Western industry is. Germany sources almost half of the early processing stages and even 84 percent of the further processed rare earth metals directly from China. Large-scale stockpiling has so far failed due to the chemical instability and toxicity of the processed intermediate products. The Middle Kingdom uses this market power strategically and has repeatedly issued restrictive export bans on separation and processing technologies in recent years in order to control the global value chain and respond to trade conflicts with the USA.
Hurdles for the European raw materials plan
The EU’s Critical Raw Materials Act is intended to serve as a political protective shield. The regulation sets ambitious targets for 2030: at least 10 percent of domestic consumption should come from European mining, 40 percent should come from in-house refining and at least 25 percent should be covered by recycling. In addition, no third country is allowed to supply more than 65 percent of the annual requirement of a critical raw material. But reality lags behind ambitions. In mining, it usually takes decades from the first exploration of a mine to actual production. There are currently very few advanced projects outside of China.
The TAB study makes it clear that simply hoping for new mines in politically friendly countries is not enough. Rather, various measures would have to be interlinked in order to achieve real raw material sovereignty. The authors therefore recommend – similar to consultants in a study for the BDI – an extensive expansion of the circular economy. The potential is great, as more and more electric cars and wind turbines will reach the end of their life cycle in the coming years.
In order to efficiently recover these valuable old magnets, the experts are calling for improved collection and return structures as well as an expansion of manufacturer responsibility. Digital product passports could provide precise information about the materials used and make sorting easier. However, European recycling has so far suffered from a lack of a closed system: Because there is a lack of refining capacity, secondary raw materials often have to be exported back to China for final separation.
From the circular economy to high-tech substitution
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According to the authors, a second pillar is substitution research. Since material recovery is often energy and environmentally intensive, avoiding critical materials is becoming increasingly important. Research focuses primarily on nanostructuring to reduce the use of heavy materials such as dysprosium or terbium in permanent magnets or to replace them with artificial alternatives such as tetrataenite or high-temperature superconductors.
In order to bridge the economic dry spells until these technologies are established, the TAB is discussing accompanying market-shaping measures. Since European recyclates are currently more expensive than Chinese primary goods due to high environmental and wage standards, government-guaranteed reference prices or the European CO2 border adjustment could offer protection. The researchers also recommend building strategic raw material reserves as a bridging instrument against extreme price volatility.
Scenarios until 2035: Collapse or sovereignty?
In three overviews, the authors dare to look ahead to the year 2035. In the darkest case of a blocked sovereignty transition, the world will split into isolationist blocs, which will consolidate China’s dominance and fail Europe’s independence. A fragmented turnaround would bring isolated successes through laboriously negotiated raw material partnerships, but would leave the old continent vulnerable to supply chain disruptions.
Only the scenario of a proactive change in sovereignty promises success: through an early, consistent focus on recycling, substitution and a European security reserve, the EU could permanently defy geopolitical blackmail, since the majority of the raw materials required are already in circulation within its own territory. Individual measures fail. According to the TAB, only an integrated approach that combines primary funding, recycling and substitution can secure Europe’s technological future.
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