Europe looks toward the Americas for Raw Materials and Critical Minerals

China has put export controls on gallium and germanium, two critical minerals necessary for the production of semiconductors, 5G communications equipment, solar panels and other technologies. China is also imposing export controls on eight gallium and six germanium products.

This move comes as the President of the European Commission Ursula von der Leyen pushes for a new economic security strategy to de-risk Europe's vulnerability of supply chains. It is also thought that the move is in response to the Netherlands putting export restrictions on advanced chip printers to China in March, which was done at the behest of the US.

Amidst the surging demand for platinum group metals, von der Leyen embarked on a journey to North America and South America where she held talks with the members of Mercosur (Argentina, Brazil, Paraguay, Uruguay and 7 other associated nations) with the aim of finalizing agreements for raw material procurement. These preparatory procurement actions are necessary as the EU must increase supply to satisfy its domestic demand while continuing its de-risking strategy. The Organisation for Economic Co-operation and Development (OECD) projects that the worldwide demand for materials will more than double by 2060, reaching an astonishing 167 billion tonnes.

In March, Commission President von der Leyen embarked on a charm offensive across the Atlantic, aiming to further strengthen the supply of raw materials and o ensure the future of green technology industries desired by new legislation drafted in Brussels. During this endeavour, Canadian Prime Minister Justin Trudeau and von der Leyen agreed to foster transatlantic trade in green hydrogen. As Canada is the sole northern hemisphere country possessing all the necessary raw materials for lithium-ion battery production, it is a primary supply target and plays a crucial role in the EU's raw materials supply chain.

In June, Commission President von der Leyen commenced a diplomatic tour of four Latin American nations - Brazil, Argentina, Chile and Mexico - to enhance political and trade relationships, recognizing that the European Union has occasionally overlooked such ties. Additionally, the EU aims to establish partnerships with various countries in the region regarding critical raw materials. An existing trade agreement with Chile may grant European companies expanded access to the country's lithium and copper resources. Moreover, a potential agreement with Argentina could facilitate the exploration of the Vaca Muerta shale oil and gas reserves. In view of the need for said materials, Argentina, Chile, Bolivia and Brazil plan to coordinate action on turning more of the region’s mined lithium into battery chemicals, as well as moving into manufacturing of batteries and EVs. With the EU’s ‘pivot towards South America’, it is clear that a substantial diversification of its raw material supply Chains is underway.

Also in June, the European Commission approved its negotiating directives for a Critical Minerals Agreement (CMA) with the United States. The main goal is to promote the development of EU-US supply chains for essential raw materials used in the manufacturing of electric vehicle batteries. In 2022, the EU alone exported critical raw materials worth €8.3 billion that are essential for this industry.

By finalizing an EU-US CMA, the EU will secure a status equivalent to that of US free trade agreement partners under the US Inflation Reduction Act. This agreement will enable European companies to compete fairly with their counterparts from the US, Chile, the Republic of Korea, and Japan in the US market. It will create a level playing field for all participants and will further the de-risking strategy south by the European Commission and White House. The Western world is looking towards itself to fulfil its supply Chains, further distancing itself from the supply chain domination of foreign nations.

While the EU's climate laws primarily focus on reducing greenhouse gas emissions and combating climate change within its own borders, they can have implications for various industries worldwide, including mining. The EU has implemented ambitious climate targets and regulations to transition towards a low-carbon economy. These measures include the EU Emissions Trading System (EU ETS), which is the largest carbon market in the world. The EU ETS places a cap on greenhouse gas emissions from certain industries, including energy-intensive sectors like mining and metal production. These regulations can indirectly impact North American mining companies that export goods to the EU or have subsidiaries operating within the EU.

On the other hand, the EU Raw Materials Initiative, a strategic framework developed by the European Commission to ensure a sustainable and secure supply of raw materials for Europe's industrial needs, and the mining sector in North America can be related in the context of raw material supply chains and global resource management. One of the key objectives of the EU Raw Materials Initiative is to diversify the sources of raw materials and reduce Europe's dependency on imports. As part of this objective, the EU seeks to establish partnerships and cooperation with resource-rich countries and regions worldwide, including North America, to ensure access to essential raw materials. North America, particularly Canada and the United States, is known for its abundant mineral resources and a significant mining sector.

All in all, the EU's engagement with the mining sector in North America can take various forms: It may involve cooperation agreements, trade relationships, and investments aimed at securing access to raw materials. Meanwhile, the EU could collaborate with North American mining companies to ensure responsible sourcing practices, promote sustainable extraction methods, and encourage adherence to environmental and social standards.

If North American mining companies are part of global supply chains that ultimately serve EU markets, they may need to comply with EU regulations on responsible sourcing and sustainable practices.