How critical is the dependence on strategic minerals

The use of critically important minerals (copper, nickel, lithium, cobalt, graphite, and rare earth metals) marks a new era in human development. The so-called strategic minerals are becoming the new "black" gold. According to experts, by 2030, the demand for minerals that are crucial for the energy transition and the digital economy will almost triple. 
Considering the fact that rare earth metals (scandium, yttrium, lanthanum, neodymium, praseodymium, cerium, samarium, gadolinium, europium, promethium, terbium, dysprosium, ytterbium, holmium, erbium, turbium and lutetium) have a relatively low prevalence in nature, increased demand may lead to their shortage and price increases, as well as the aggravation of geopolitical tensions. 
To avoid this, investments are required in the search for new deposits, the development of recycling technologies and the search for alternative materials. 

STRATEGICALLY IMPORTANT 

Without critically important minerals, it is impossible to create advanced technologies in medicine, instrumentation, metallurgy and chemical industries, as well as the functioning of robotics and artificial intelligence. According to various estimates, about 60% of rare earth metals are used in high-tech industries, including aviation and rocket engineering, radio electronics, military space and defense industries. 
Meanwhile, the risks to global supplies are related to the fact that their deposits are concentrated in a limited number of countries. The European Union, which is trying to maintain its status as a global player, is now dependent on fossil fuels with a growing need for critical raw materials such as lithium and rare earths. Comparisons between Europe's dependence on fossil fuels and strategic minerals can often be heard during television debates, as well as in policy statements at both the national and international levels.
The President of the European Commission, Ursula von der Leyen, drew a parallel between the European Union's dependence on hydrocarbons and the growing need for critical raw materials during her speech in 2023 on relations between the European Union and China. 
"Lithium and rare earths are already replacing gas and oil at the core of our economy. ( ... ) We must avoid the same dependence as in the case of oil and gas," said the head of the EU's highest executive authority. 
Although von der Leyen's analogy rightly warns that the supply of rare earth metals to EU member states faces vulnerability due to restrictions imposed by China on the export of these resources, it is based on a simplified and misleading view of global supply chains, the physical nature of resources and the geo-economic balance of power. 

A NEW THREAT TO THE EU?

Is it really possible to compare lithium supplies with Russian gas? The answer is obvious: no. And the explanation is quite obvious. 
Unlike gas or oil, which are consumable materials that can be destroyed as a result of use, metals, due to their physical properties, can be infinitely processed without loss of quality. The EU legislation on critical raw materials requires that by 2030 the share of localization of processing of lithium and rare earth elements exceed 40%. Recycling is intended to become the main source of secondary metals supplies. 
In contrast to the oil and gas situation, the European continent's current dependence on rare earth supplies can decrease rapidly if Europe invests in recycling and recycling of previously extracted minerals. According to estimates by the European Federation of Transport and the Environment, recycling can cover up to 40% of European demand by 2030 and almost two thirds by 2040 through the use of industrial waste. 
Although the amount of metal recycling used in low-carbon technologies such as lithium-ion batteries remains insignificant, this is due not so much to technical obstacles as to the small volume of end-of-life products currently available. 
According to EU experts, with the full implementation of the planned projects, Europe can achieve 80% self-sufficiency in lithium. However, the situation with cobalt and rare earth elements remains uncertain. The shortage of cobalt, lithium and nickel threatens the competitiveness of the European Union in the global electric transport market. 

THERE IS NO IDENTITY 

The supply of rare earths should not be equated with gas or oil. While hydrocarbons are directly linked to all consumers, metals acquire strategic importance to the extent that a country develops its industrial potential, depending on them. China controls a significant part of the global production of rare earth metals (in 2023, China accounted for more than 70% of global production), which makes it a key player in this market. 
Despite its dominant position, Beijing's ability to use strategic minerals as a lever of geopolitical pressure is relatively limited. 
This is due to the fact that metals are traded in more diversified, flexible and adaptable global markets. Thus, they are less easy to turn into instruments of geopolitical influence. Importing countries of rare earths have a number of alternative options: diversification of supplies, creation of strategic reserves, government investments in new processing facilities or development of alternative technologies. 
This was successfully demonstrated by Japan, which, after China's embargo on exports of rare earths in 2010, quickly found alternatives through investments in the United States (second in production) and Australia (fourth). 
Finally, China itself is heavily dependent on imports of unprocessed raw materials, especially lithium from Australia and Latin America, the processing of which provides the country with up to two thirds of global production. This dependence narrows Beijing's space for strategic maneuver: any attempt to intimidate by restricting exports could turn against its own lithium-consuming industries. 
In addition, the lithium and rare earth element markets are much smaller than the oil and gas markets, both in value and volume. In 2024, the global hydrocarbon market was estimated at almost $6 trillion, compared with about $28 billion for lithium and between $4 billion and $12 billion for rare earths. 
Even despite the cumulative peak in production, rare earths and lithium, although playing a central role in the energy transition, account for only a small share of the global oil and gas market. 
The transition from one type of energy to another is performed by superimposing: each new source is added to the previous ones without causing them to disappear.
This dynamic calls into question optimistic assumptions that fossil fuels will soon become a thing of the past. Despite the commitments of major economies to achieve carbon neutrality, it is likely that the use of oil and gas will continue in many sectors. 

NOT AN ALTERNATIVE 

Low-carbon technologies will not replace all applications of hydrocarbons, especially where they remain difficult to replace, particularly in industry. 
In other words, the energy transition not only does not mark the end of the era of fossil fuels, but it is also doomed to a long-term coexistence with critically important minerals. Thinking about energy transition through the lens of binary technological substitution actually masks the complexity of industrial interdependencies and can lead to false strategic priorities. 
It is necessary to understand the specifics of the value chains of low-carbon technologies and develop policy measures appropriate to the realities of today. 

Alex Shishlo, Editor in Chief of the European Bureau, Rough&Polished