Rare earths: Stuck in the middle (with EU)

Rare Earths: A Strategic Imperative

Attaining these objectives requires the EU to gain effective control over critical technologies and, crucially, the rare earth materials essential for their manufacture. This issue has become increasingly urgent as recent tensions between China and the United States have seen China threaten to limit exports of rare earth minerals and related products. These minerals are indispensible for multiple industries, including mobile communications, automotive manufacturing, defence equipment, and renewable energy technologies.

The EU’s position is particularly vulnerable, as over 80% of its rare earth imports originate from China. Without a resolution, the supply of these vital minerals and components may dwindle, impacting numerous sectors. In response, EU President Ursula von der Leyen has announced a new initiative to establish strategic stockpiles of these materials. However, this effort coincides with escalating prices and mounting global competition, as other major economies such as the US and India pursue similar strategies.

Geopolitical Dynamics and Market Concentration

As noted by German Foreign Minister Johann Wadephul, the global rise in protectionism is a significant factor in China’s actions. China is leveraging its dominant position within this specialised sector to counter recent US tariffs and safeguard its own industries. These developments are a direct consequence of reciprocal trade policies introduced in the current year.

Furthermore, the current situation is partly attributable to the EU and other nations having overlooked China’s strategic accumulation and near-monopoly of rare earth minerals over several years. Continued reliance on a single supplier for such critical resources now appears increasingly untenable, particularly as these materials are essential for the defence and renewable energy sectors—areas where the EU is seeking to build critical capabilities.

Pathways Forward

Addressing these challenges will require a long-term commitment. Establishing the necessary infrastructure, opening new mines, and forging alternative trading relationships represent multi-year undertakings. Nonetheless, pursuing these measures aligns with the EU’s broader strategic objectives. In the near to medium term, however, the EU remains in a position where it must seek compromise with China, thereby deepening its interdependence until it can achieve greater self-sufficiency.

This situation continues to evolve and as of this morning (30 October) it looks as if a last minute US/China agreement has seen this postponed for a year at least, but the wider point remains and exemplifies the broader issues the EU must confront as it endeavours to maintain its economic and geopolitical standing in a rapidly changing global landscape.

Written by Aaron McGarry.