Competition for Competitiveness

Abstract 

Critical raw materials (CRMs) are not mere commodities but the essential building blocks of modern technologies, prosperity, and security. As global demand accelerates, a strategic race is emerging to secure access to these vital resources, fuelling competition and geopolitical tension. This article examines the European Union’s vulnerable starting position in this contest, given its limited domestic supply of CRMs compared to others, and argues for a proactive, coherent policy response by Europe. Central to this is deepening integration of the EU Single Market by mainstreaming circular economy principles and boosting material productivity – stagnant since the 1970s – and creating demand-side incentives. The article also proposes a Critical Raw Materials Efficiency First Principle, as well as underscoring the importance of public-private collaboration and international partnerships. Delivering this vision will take time, and sustained political will is therefore key.  

Introduction

If oil built today’s fossil-fuelled economy, critical raw materials (CRMs) will power the clean-tech-driven one of tomorrow. 

The shift from fossil fuels to CRMs is serving as a catalyst for the change we see in the world today that is reshaping global politics and power: from the newly agreed, first-of-its-kind US–Ukraine economic partnership agreement and its emphasis on ‘natural resource projects’, to the first initiatives for deep-sea mining that could reach into disputed resources in international waters, to rising tensions over the Arctic region.  

Why all the fuss? CRMs are not merely commodities. They are the building blocks of modern technologies and future prosperity: from sustainability applications and the clean energy transition (such as electric vehicle batteries, solar panels, and electrolysers) through to digitalisation (for example, microchips and semiconductors) as well as defence and security (including drone guidance systems and stealth war planes). For this reason, everyone is after a piece of the pie.  

Global demographic trends – population growth, urbanisation, and rising living standards – are also driving escalating demand.  

However, these metals, minerals, and rare earth elements (REEs) – such as cobalt, graphite, nickel, neodymium, and palladium – face significant supply risks due to limited availability and geographical concentration.  

For example, global demand for lithium – a key material for batteries – is projected to grow by over 40 times by 2040 compared with current levels, from 95 kilotonnes to 455 kt by 2030 and 928 by 2040 (IEA, 2021). Global supply today is at approximately 200 kt, with only three countries – Australia, Chile, and China – accounting for around 85 per cent of the total (Venditti, 2024). For some materials the concentration of global supply can reach monopolistic levels; for example, China holds 91 per cent of magnesium and 94 per cent of gallium supply (European Commission, 2023).  

This comes at a time of rising geopolitical tensions. We already see these new forms of dependencies being leveraged, even weaponised, for political gain. In recent years, China – blessed with significant reserves of CRMs and a dominant player in the refinery industry – has placed restrictions on exports of graphite to Sweden to limit competition (The Economist, 2023), on germanium and gallium to the European Union in reaction to the Netherlands’ curbs on exporting advanced chip equipment, and on materials more broadly to the US in response to President Donald Trump’s tariffs.  

In short, access to CRMs defines capability and power in this new era, and with that the ability to determine one’s own prosperity and future.   

Europe’s first steps in adapting to the new raw materials order 

Against this backdrop, Europe must act now, and decisively, to secure its future.  

However, Europe is starting with a weak hand because it is a comparatively resource-poor continent. Consequently, there are strong import dependencies (see Figure 1). While the EU does have industrial capacity in extraction (such as cobalt in Finland, lithium in Portugal, and REEs in Sweden), these operations remain small-scale. In refining, the picture is also challenging as China controls around 70 per cent of global processing capacity for many critical minerals (IEA, 2025). On the recycling front, Europe has a more promising foundation, but recycling currently supplies only a small fraction of the EU’s total CRM needs. Therefore, the EU must significantly scale up its capacity across all stages of the value chain.  

The EU institutions have begun to take steps to respond. These include:   

• The EU Critical Raw Materials Act (CRM-A), which aims to boost EU autonomy and bolster supply chain resilience. It does so by setting targets for extraction, processing, recycling, and import diversification as well as accelerating the expansion of domestic supply by facilitating permitting processes.ⁱ It also creates a framework to support strategic projects in Europe, the first set (of 47) of which was recently announced by the European Commission and will be supported with €22.5 billion.  

• The Waste Shipment Regulation, stricter rules that came into force a year ago on the export of waste, including that containing CRMs, to non-EU (and specifically non-OECD) countries. This means that materials such as ‘black mass’ – a hazardous intermediate product from battery recycling rich in CRMs including lithium, cobalt, and nickel – can now be retained more easily within Europe.  

• The Ecodesign for Sustainable Products Regulation (ESPR), as well as product-specific legislation such as the Batteries Regulation, which pushes towards embedding circular economy principles into products placed on the Single Market.</BL> 

These early initiatives must be foundational tools and an opening gambit, not the finish line. And they need to be coupled with serious market incentives and funding if Europe is to turn its ambitions into reality. 

A long road to resilience: Strategic levers in Europe’s quest for resource security and industrial sovereignty

Market integration

The first lever that the EU should pursue is further market integration. In doing so, Europe should embed circular economy principles as a market force in order to build self-sustaining business cases.  

The Draghi report’s core message is a simple one: deepen integration, or face economic stagnation and diminished global influence (European Commission, 2024a). The circular economy is a systems solution framework that is based on three principles: circulate products and materials (at their highest value), eliminate waste and pollution, and regenerate nature (Ellen MacArthur Foundation, n.d.). By reshaping the economy and production processes according to these principles, we can move from today’s single-use, linear economy to a resource-efficient, regenerative, and circular one.  

Strikingly, while labour productivity has more than tripled since 1970, material productivity has stagnated (Grabbe & Moffat, 2024 & see Figure 2). This has been driven by government and market failures that, on the one hand, disincentivise and get in the way of economic operators and individuals making resource-efficient choices. This notably includes the artificial cheapness of virgin raw materials as the environmental and social externalities and costs associated with their extraction are not accounted for in their prices. Instead, they are carried by taxpayers and local residents (Grabbe & Moffat, 2024). On the other hand, too few incentives to promote demand for secondary raw materials exist in today’s regulatory framework. This is exemplified by the fact that Europe still exports large amounts of scrap (ferrous scrap exports more than doubled in recent years, reaching 19.43 million tonnes in 2021 – about 20 per cent of total scrap generated in the EU) (European Commission, 2025). Europe does not have a scrap leakage problem – it has a scrap demand challenge, as recycled materials continue to be overlooked by European manufacturers (Ettinger, 2025). 

The first strategic lever on which Europe must pull much harder is making more and better use of the materials we do have. This needs to be at the heart of future actions to deepen the Single Market. The EU must also be much bolder in mainstreaming incentives into the regulatory framework that build up these business cases. That, in turn, will nudge companies and individuals towards taking up circular economy practices. Where demand is in place, supply will follow. The European Commission’s proposal for a Circular Economy Act in 2026 goes in the right direction by focusing on ‘creat[ing] market demand for secondary materials and a single market for waste, notably in relation to critical raw materials’ (European Commission, 2024b: 9).  

While the Batteries Regulation includes recycling and recycled content targets for CRMs, an opportunity was missed in the revision of the end-of-life vehicles Directive, where recycled content targets are limited to plastics (the European Commission only commits to a feasibility study for steel and aluminium targets). Similarly, under the aforementioned ESPR, first proposed in March 2022, realistically we will not see the first ecodesign requirements for specific product categories hit the EU market until somewhere between 2027 and 2030. This is too little, too late. 

Moreover, in practice Europe still has 27 separate markets as the Single Market for waste and materials remains fragmented (see, for example, the scope and set-up of Extended Producer Responsibility Schemes across Europe). In practice this means that certain scrap metals cannot circulate freely in the Single Market. EU-wide common standards would deliver a predictable regulatory framework and would support developing the market and industry for secondary materials, as well as increasing the scale at which they operate. This fragmentation is exemplified by the stagnant circular material use rate in Europe, a mere 11.8 per cent in 2023 (up from 10.7 per cent in 2010) (European Environment Agency, 2025).  

Governance

The second lever on which the EU must continue acting is governance. We must tell it as it is: the EU institutions cannot deliver this agenda alone. What the EU institutions can do is coordinate actions and harmonise rules to create a predictable and level playing field. It can introduce certain market-based incentives to promote circular practices. It can also allocate some funding through the EU budget (1 per cent of EU GDP) and, for example, the European Investment Bank. 

However, the firepower to make a significant difference lies with the Member States – specifically, with national, regional, and local authorities. For example, fiscal incentives can only come from them. They are the ones who can introduce tax breaks and make use of procurement rules that favour secondary raw materials over primary ones. Similarly, by running the permitting processes, they play a determining role as to which projects see the light of day and which do not. Without this hands-on delivery and follow-through, no amount of coordination will translate into real-world impact. This is where the Europe Commission’s proposed Competitiveness Coordination Tool can also play a role, and CRMs and circular economy should be the first area in which to align national actions. 

At the same time, we must acknowledge that government alone is not enough to deliver this agenda. It will require the public and private sectors to work hand in hand to encourage project developers and to see through their projects. Europe has leaders in this sector. For example, the Swedish materials company LKAB (Luossavaara-Kiirunavaara Aktiebolag) is developing a circular process to extract REEs and phosphorus from the mining waste of its iron mines, with production expected to start in 2027.ⁱⁱ This would prevent valuable materials from ending up as waste, increase the economic viability of mining (as many CRMs are extracted as by-products and often are not economically recoverable on their own), improve Europe’s self-sufficiency in these vital resources, and reduce the environmental impact of mining (CISL & Wuppertal Institut, 2023). LKAB has also uncovered reserves of one million tonnes of REEs – the largest known deposit of its kind in Europe (LKAB, 2023).  

The European Raw Materials Alliance (ERMA) established in 2020 is a good example of the positive impact that coordinated governance among these different levels can have.ⁱⁱⁱ This has facilitated and accelerated the identification and investment into new business models and concrete CRM projects within Europe, thereby enhancing its capabilities and outcomes on the ground. The ERMA and the support given to it should be significantly scaled up to amplify its positive impact. 

The EU institutions should take two further steps in this area: 

1. Introduce a Critical Raw Materials Efficiency First Principle. This would aim to ensure that CRMs are better sourced and used where they are needed most, and that upstream solutions are prioritised. The energy crises of the 1970s and 2020s led to drives for energy efficiency, but there has been no such systematic drive for materials efficiency despite relatively high material input costs for European manufacturing (Grabbe & Moffat, 2024). This measure could include establishing, based on best available techniques (BATs), industry standard values for the use of CRMs for strategic technologies as well as recommendations to Member States on best practices to optimise the cross-sectoral demand for CRMs. Such a principle has the benefit of guiding the actions of individuals who are best placed to know what will work in their given local context, rather than prescribing in detail how they should do it from afar. 

2. Support the establishment of a Global Materials Observatory with a Europe department to bring together the EU’s data, knowledge, and measurement efforts regarding CRMs (currently undertaken by several actors such as Eurostat, the Joint Research Centre, and the European Environment Agency). What you don’t measure, you can’t manage or legislate for. We need to know where our materials come from, how we use them, and where they end up. And in the current geopolitical environment, these measurements are not a technical detail. They are a political necessity. Alternatively, the EU could set up such an Observatory at the European level, similar to the European Scientific Advisory Board on Climate Change

Material-specific strategies and actions 

A third lever on which the EU could advance in the coming years is designing material-specific strategies and actions. One-size-fits-all approaches rarely work – and they are not fit for purpose when dealing with CRMs.  

Different materials have different market dynamics shaping their demand and supply as well as different value chain characteristics. For example, recycled aluminium is seen and treated as a valuable commodity in a highly internationalised market. It is actively traded on the London Metal Exchange (LME), where it is considered a benchmark industrial metal. The sophisticated infrastructure of the LME offers price (as well as demand and supply) transparency and liquidity for both physical and financial market participants. 

Conversely, REEs such as terbium are not actively traded on international commodity exchanges. Instead, these materials are typically sold through opaque, bilateral contracts, often tied to long-term supply agreements through a limited number of producers and refiners globally. That in turn means a lack of price transparency, leading to risk and dependencies.  

The EU needs to integrate this reality into its thinking and develop material-specific strategies and action plans. The newly released EU Steel and Metals Action Plans, covering the steel, aluminium, copper, and nickel sectors, is a first step in the right direction. Now others need to follow. 

Critical raw materials as the EU’s long-term objective: EU institutions’ perspective 

The adoption of the Critical Raw Materials Act (CRMA) in May 2024 stemmed from the sudden stark realisation that prolonged inaction had left the EU lagging while others secured dominance in critical resources. It took the COVID-19 pandemic for the European Commission to publish, in September 2020, a Communication on ‘Critical Raw Materials Resilience: Charting a Path towards Greater Security and Sustainability’. Warning that ‘the stakes are high’, it highlighted that one of the lessons of the pandemic was the need to reduce dependency and strengthen diversity and security of supply. The pandemic acted as the initial shock, as the supply chains for essential medicines, as well as medical devices and equipment, were seriously impeded. For instance, China was the main EU partner for the import of face masks, supplying 92 per cent of this product in the first semester of 2020 (Eurostat, 2020). A year later, in November 2021, the European Parliament went in the same direction, adopting a Resolution on European strategy for critical raw materials (European Parliament, 2021). Building upon this economic logic, the Act emphasises that the EU ‘relies heavily on imports, often from a single third country, and recent crises have underlined EU strategic dependencies’ (European Commission, 2024b). To translate, the EU’s dependence on systemic rivals such as China became evident, and the COVID-19 pandemic exposed how unprepared the Union was to face global challenges. 

However, it was only after Russia’s aggression in Ukraine that the EU started to accelerate its work on this issue. With the outbreak of the war, the Union’s energy dependence on Russia became all the more exposed, limiting the EU’s capacity to take effective action.⁸ In fact, in March 2022, just two weeks after the war started, EU leaders adopted the Versailles Declaration, highlighting the importance of reducing ‘strategic dependencies’, identifying critical raw materials, and securing strategic partnerships as means to obtain them (European Union, 2022). As a response, six months later, the CRMA was announced by European Commission President Ursula von der Leyen in her 2022 State of the Union speech, where she highlighted that ‘lithium and rare earths will soon be more important than oil and gas’ (Von der Leyer, 2022). Having listed lithium among the key critical raw materials, the CRMA was put into effect in May 2024. In line with it, all Member States have committed to the 2024–2029 Strategic Agenda, stating the necessity to ‘reduce harmful dependencies and diversify and secure strategic supply chains’ (European Council, n.d.). Moreover, in her speech on her second administration’s programme in November 2024, Von der Leyen clearly stated that critical raw materials are vital to reinforcing economic security, defined as one of the pillars of the newly introduced ‘Competitiveness Compass’ (Von der Leyen, 2024).⁹ With the consensus among all EU institutions on the importance of critical raw materials, the CRMA has become a landmark piece of EU legislation with the ambition to strategically redefine the EU’s global outlook.  

The EU’s newly adopted policy outlook is here to stay. Some concerns arose regarding the EU’s future direction in the aftermath of the European Parliament elections in June 2024, given that European citizens voted in favour of moving the EU towards the right of the political spectrum. Although a more right-leaning European Parliament might face more hurdles to adopt policies envisioned by the established political groups, the implementation of the CRMA will not be among those policies. The analysis of votes for the CRMA indicates that it has received overwhelming support from all but one political group despite the many ideological and policy differences between them (HowTheyVote.eu, 2023). Among those supporting the CRMA were the European People’s Party (EPP), Progressive Alliance of Socialists and Democrats (S&D), and Renew Europe (RE), which even committed in their Cooperation Statement to ‘enhance competitiveness in strategic industries’ (EPP, S&D, & RE, 2024). Beyond mainstream groups, the CRMA was also supported by the Greens/European Free Alliance (G/EFA), European Conservatives and Reformists (ECR), Identity and Democracy (ID), and even the Non-attached members (N/A). The only exception was the Left, the smallest political group, which demonstrated varying voting approaches, with 47 per cent of the group voting against, 34 per cent abstaining, and 19 per cent voting in favour. Consequently, the breakdown of all votes on the CRMA is as follows: 515 MEPs in favour (89 per cent), 34 against (6 per cent), and 28 abstentions (5 per cent). This alignment indicates that the consensus on the CRMA is one of the rare instances where different political groups share the same view, indicating that its future is promising and resistant to internal changes of political constellations. 

International partnerships and ‘materials diplomacy’

The fourth lever centres on international partnerships and materials diplomacy. The US–China dichotomy dominates the conversation (accounting for about 30 per cent of global imports), and the US is shaking up the multilateral trade system led by zero-sum thinking and moving from a rules-based system to a power-based one. 

However, there are 190 other countries in the world representing about 60 per cent of global trade. This presents the EU with an opportunity to build a network of strategic partnerships to address CRM needs based on a win–win mindset. This is one way in which Europe can also walk the tightrope between open but fair trade and strategic autonomy. 

This is the mindset that should underpin the new Clean Trade and Investment Partnerships the EU plans to build up in the coming years. The recently modernised EU–Chile trade deal, which includes enhanced cooperation on sustainable raw material supply chains, signals a shift towards more geopolitically aware economic diplomacy while defending a continuation of the rules-based, democratic approach to global trade.

Conclusion: Where there is (political) will, there is a way (to deepen European and Single Market integration) 

Where once pipelines defined influence, it is now supply chains of the likes of lithium, cobalt, and neodymium. In the new geopolitical economy, industrial power will be shaped by access to metals, minerals, and rare earths as much as innovation.  

For Europe, the competition for CRMs is a test of whether it can turn values, smart regulation, and economic openness into strategic strength – meaning, in this context, resource security and industrial sovereignty – in contrast to those pursuing resource nationalism. 

It is also a fundamental test of whether Europe can muster the political will to pull the levers that are in its control in this global race. The first priority in this must be targeted integration to maximise the benefits of the Single Market’s scale. And, more importantly, it is a test of whether the EU can sustain that political will in the long run to see through the building of this new resource system and end-to-end supply chains that are resilient and reliable for Europe, as well as a system that upholds the rules-based multilateral system and does not descend into one where power alone dominates. 

References 

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  Venditti, B. (2024). ‘Ranked: The World’s Largest Lithium Producers in 2023’. Visual Capitalist, 23 May, https://www.visualcapitalist.com/ranked-the-worlds-largest-lithium-producers-in-2023/. 
    
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