Critical Minerals Race Heats Up: US, EU Challenge China's Dominance

The US and EU join forces to secure critical minerals for clean energy. Can they counter China's dominance and ensure a sustainable future?

The clean energy revolution faces a hidden roadblock: critical minerals. These essential elements, needed for everything from electric vehicles, microchips to solar panels, are currently controlled by a single player: China.

The US and the European Union are merging strategic initiatives to better engage with suppliers of critical minerals in resource-rich nations. This collaboration aims to blend the EU's concept of a Critical Raw Materials Club with the Biden administration's flagship Minerals Security Partnership. According to Bloomberg News, US and EU officials are aiming to reach an agreement later this month, with an official launch of the project expected in March.

Washington and Brussels are particularly concerned about China's grip on the market for critical minerals, a broad term encompassing raw materials used in electric vehicles, computing power, chip manufacturing and emerging clean tech projects. Minerals like lithium, cobalt, nickel, and copper are deemed essential for clean technologies like electric vehicle batteries and solar and wind power. A shared concern among countries is that a lack of readily available critical minerals could slow down their energy transitions. The International Energy Agency (IEA) predicts that with most countries committed to reducing greenhouse gas emissions as per the Paris Climate Agreement, the total mineral demand from clean energy technologies will double by 2040.

The Engine of Clean Tech: Critical Minerals and Rare Earths

While there is no universally standardized list of critical minerals, the US, China, and the EU all prioritize strategic acquisition of these metals based on their future technology needs and projected supply and demand. Among the metals on all three regions' lists are lithium, cobalt, graphite, copper, tungsten, aluminum, and rare earths.

All these competitors are seeking to reduce their dependence on others for critical these minerals. China, however, has taken this a step further by limiting or completely blocking the export of certain metals like graphite, gallium, and germanium, which are crucial for semiconductors, solar technology, and cells. These measures are seen as retaliation against US and EU sanctions that restricted the export of chips and chipmaking equipment.

The US itself is also looking to reduce its reliance on imports. Currently, the country is 100% import-dependent on manganese and graphite, and a staggering 76% dependent on cobalt. Europe's situation is even more concerning (Visual Capital). Europe is doing even worse. The Atlantic Council reports that Europe's mining sector lags behind Beijing's by 15 years, leaving them heavily reliant on China for critical metal supplies. For instance, a staggering 98% of Europe's rare earth supply comes from China.

China's Dominant Position in Critical Minerals

While China's environmental policies are not exactly known for their friendliness, the country is currently the world's largest producer of most critical minerals needed to achieve Net Zero emissions by 2050. China produces a whopping 60% of all rare earth elements used in high-technology devices like smartphones and computers. Additionally, they control a 13% share of the lithium production market and refine around 35% of the world's nickel, 58% of lithium, and a dominant 70% of cobalt (Visual Capital).

Despite China's current lead, the transatlantic allies are taking encouraging steps towards a more balanced market. They have identified more than a dozen potential projects for cooperation on critical metals. Furthermore, the EU has established the Critical Raw Materials Club, designed primarily as a buyers' cartel. This club would allow allies and partners to pool investment and coordinate market behavior among members, keeping geopolitical and economic security concerns at the forefront. The United States is also using its political strength to beef up its minerals partnership by setting strategic alliance beyond Europe with countries such as South Korea and Japan to maximize closer cooperation in demand and supplies of the critical metals.

Having said that, the lengthy and expensive process of developing new mining or refining projects means Beijing's significant lead in several critical mineral sectors will likely continue for some time. This means the US and Europe will need to play catch-up if they are to achieve a more reliable and balanced market.

Conclusion

As the global competition for critical minerals intensifies, the US-EU collaboration represents a significant step towards a more balanced and secure market for clean energy technologies. While China's current lead is substantial, continued international cooperation that expands beyond the US and EU to include strategic partners like South Korea and Japan, coupled with advancements in clean technology and a focus on responsible mine recycling, offers promising options for a more sustainable future. The race for critical minerals is not just about geopolitical dominance, but about building a clean energy future for generations to come. Will the US-EU alliance succeed? Only time will tell, but their actions serve as a wake-up call for other nations to invest in responsible exploration, extraction, and recycling practices to ensure a secure and sustainable supply chain for the clean energy revolution.