Germany

The global race for critical mineral resources is heating up. Against the backdrop of soaring demand and rising geopolitical tensions, nations are scrambling to diversify their critical mineral supply chains away from adversary nations, i.e. primarily China, and, in the case of Europe, also Russia.

While the European Union works to flesh out what is expected to be landmark legislation said to rival the U.S. Inflation Reduction Act to combat climate change and strengthen supply chains, German Chancellor Olaf Scholz traveled South America to lobby key mineral producing countries to prioritize resource cooperation with Germany.

After years of complacency, fueled in part by what German officials described to Reuters as a “distaste for the dirty business of mining and faith in the open market,” German stakeholders are now pushing for securing and diversifying supply chains “for example through offtake agreements, stakes in mines, or possibly the establishment of Germany’s own processing capacity.”

During his trip, Scholz signed a commodity partnership agreement with Chile aimed at strengthening cooperation via an annual bilateral forum and “state instruments” like investment guarantees. According to Reuters, Chile and Germany recently launched a hydrogen pilot project in Patagonia drawing on wind energy which is backed by the German government while leveraging technology from Siemens Energy.

While South America is a target-rich environment for Scholz’s lobbying efforts, with the region home to key mineral producers, the southern hemisphere has also seen a rise of resource nationalism which may complicate his mission.  Although he also visited Argentina on his trip, no agreement with the country has been announced, and a 2018 Bolivian-German lithium joint venture fell apart in 2020 amid domestic political turmoil in Bolivia. [See our post on nascent resource nationalism in Central and South America here.]

Scholz’s lobbying tour to South America comes as the EU-co-funded EIT Raw Materials, an innovation community within the European Institute of Innovation and Technology, calls on the European Union to use its to-be-released Critical Raw Materials Act to speed up permitting and and strengthen investment into the metals and minerals underpinning the green energy transition.

While the EU and the United States are close allies, Europe will not only have to compete with China and Russia for resources, but also with the U.S., with the Biden Administration’s Inflation Reduction Act serving as a key vehicle to spur investment in the critical minerals sector.

As EIT Raw Materials CEO Bernd Schaefer argued in an interview earlier this week, “[w]e all know Europe isn’t as agile and quick when it comes to decision-making. The Americans take the fast track and the super fast track has been taken by the Chinese.”  

With the comment that what passes for fast from the European perspective isn’t nearly fast enough, it’s encouraging that we can expect more activity across the Atlantic in the coming months.

It’s a brave new world, in which stakeholders will have to strike a sustainable balance between competition and cooperation in the critical mineral resource sector.  It’s not an easy task, but one that the United States can achieve with a comprehensive and decisively implemented all-of-the-above approach to mineral resource security.

Against the backdrop of mounting geopolitical and ongoing supply chain challenges, countries are left grappling with the the mineral intensity of the sought-after global transition towards a net zero carbon emissions future.

In their quest to untangle complex critical mineral supply chains and reduce over-reliance on adversary nations, the extent of which was first brought to light in the coronavirus pandemic, nations are not only forming partnerships like the recently-announced Minerals Security Partnership (MSP), which Reuters’s Andy Home likens to the formation of a “metallic NATO,” they are also taking their own steps to secure supply chains for domestic manufacturers.

In the following, we’re taking a look at resource related activities in countries beyond ARPN’s usual purview (which of course is focused on the United States but sometimes includes our close allies Canada and Australia):

• Earlier in July, the United Kingdom released its first ever Critical Minerals Strategy, setting out, in the words of Secretary of State for Business, Energy and Industrial Strategy Kwasi Kwarteng, the UK’s “plan to secure our supply chains, by boosting domestic capability in a way that generates new jobs and wealth, attracting investment and playing a leading role in solving global challenges with our international partners.”

  The announcement comes only days after the launch of a Critical Minerals Intelligence Centre (CMIC), which seeks to “boost the country’s resilience and growth by providing up-to-date data and analysis on the supply of critical minerals,” and “develop evidence-based policies aimed at developing more robust critical mineral supply chains to the UK.”

• Germany, too, is taking steps to decouple from adversaries and bolster its domestic supply chains emphasizing domestic production, processing and recycling over imports.  Upon taking office, the new Federal Government  set itself the ambitious goal of presenting a comprehensive National Security Strategy within its first year. The process was kicked off in March of 2022, a few weeks after the Russian invasion of Ukraine, which served as an eye opener for Germans and Europeans in terms of their dependence on Russian energy supplies, particularly oil and gas. Consequently, Foreign Minister Annalena Baerbock has made clear that Germany must ensure that it cannot again fall victim to blackmail as it did over its dependence on Russian energy, and is looking for ways to reduce the country’s economic dependence on China, which is particularly high when it comes to supplies of Rare Earths.

  In the same vein, the German Federal Institute for Geosciences and Natural Resources (BGR), in partnership with the German Resource Research Institute (GERRI) has released a research paper calling for a “rethink” for German resource policy. Outlining that German resource policy rests on three pillars — imports, domestic development and processing, and recycling — the authors of the report call for strengthening the second and third pillar over the first one going forward.

• But it’s not just Western nations feeling the heat — South Korea, too, is starting to feel vulnerable over critical minerals.  The Korean National Assembly Research Service has said that “securing metal resources will be a key to energy security, and stressed the importance of plans to stockpile metal resources and diversify suppliers.”

  A founding member of the Mineral Security Partnership (MSP) led by the United States, South Korea is planning to “draw up related measures such as measures to stockpile more mineral resources,” after having neglected its resource policy over the past decade, according to researchers.

These are only a few examples of mineral resource policy developments beyond ARPN’s usual purview, but they all make one thing abundantly clear:  With geopolitical tensions rising, countries are realizing that critical mineral resource supply chains are vulnerable to manipulation or weaponization, and are taking steps to shore up their domestic development and processing capabilities.  All-of-the-Above increasingly appears to be the order of the day.  Friend-shoring is an important pillar of any resource strategy, but must be embedded into a comprehensive approach from mine to manufacturing and across all segments of the value chain.

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In line with the country’s recent policy shift towards a more active role in the global race for critical mineral resources, a German mining and commodity group has announced its plans to develop a 38,000 tonnes deposit of REEs in the East German state of Saxony.  A newly formed company called Seltenerden Storkwitz AG, which [...]

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