High-tech metals and rare earths: The next raw material trap for Europe

High-tech metals such as palladium, nickel, lithium and neodymium play a decisive role in the development of important future technologies. However, the availability of these strategic raw materials depends to a large extent on suppliers such as China or Russia. “But these countries no longer see themselves as part of a free and open world market. In addition to the current gas crisis, there is also a risk of an explosive raw material trap in Europe for strategic metals," warns Dr. Heinz-Werner Rapp, founder and director of the FERI Cognitive Finance Institute, in a current analysis.

Dangerous dependencies on important future issues

Accordingly, high-tech metals and rare earths are of essential importance in many areas. This applies to all processes associated with digitization and decarbonization, including telecommunications, wind power and electromobility. Germany in particular relies mainly on imports from China and Russia, according to the analysis by the FERI Cognitive Finance Institute: 19 of the 30 raw materials classified as critical by the EU came from China. "It is very worrying that China often not only dominates the raw materials, but also the downstream value chain up to the end product," says Rapp. The corona pandemic had already revealed how risky such dependencies can be, but the latest developments in Russia have massively increased this risk. The importance of strategic metals is made clear by the example of lithium, which as a battery raw material for electric vehicles is an indispensable key component of the energy transition. “Lithium demand will increase at least twentyfold by 2050. This is already leading to noticeable shortages today,” warns Rapp. China is also one of the most important producing countries for lithium and also dominates global processing. "Here's the new dilemma: The more Europe tries to break away from Russian natural gas through alternative energies, the greater the dependency on strategic metals," says Rapp.

Geopolitical turning point exacerbates global supply situation

In the area of ​​strategic metals, Europe has so far (as in the case of energy) neglected the aspect of a secure supply of raw materials. Dependence on politically dubious actors continues to increase, reinforced by current geoeconomic trends. "The previous world order is becoming increasingly unstable - there is a threat of a new Cold War with a split in the world economy into separate hemispheres," emphasizes Rapp. Any new geopolitical tension, triggered by a conflict between the USA and China over Taiwan, for example, could then lead to a drastic deterioration in the global supply situation for strategic metals. Entrepreneurs and investors should adapt to this scenario in a timely manner: Industries with a high demand for strategic metals must be closely monitored with a view to possible supply risks; at the same time, selective raw material sectors and topics such as recycling also offer attractive opportunities.

The detailed analysis is available in German in the download section.