Germany is investing one billion euros to secure its supply of critical minerals, such as cobalt, copper, lithium and rare earths, as it seeks to reduce its dependence on China and other producers.
The plan, which was revealed by sources familiar with the matter, involves providing financing for projects in extraction, processing and recycling of these essential materials. The state-owned KfW development bank will manage the fund and coordinate with similar initiatives from France and Italy.
The move comes amid growing concerns over the vulnerability of Europe’s supply chains for high-tech and green industries, especially after the pandemic disruptions and Russia’s invasion of Ukraine. Critical minerals are needed for making microchips, wind turbines, batteries and other key products.
The fund will focus on projects that contribute to the security of supply of critical minerals defined by the European Union’s Critical Raw Materials Act, which was adopted in November 2023. The act aims to boost domestic mining and reduce dependency on any one country.
Why Germany Needs Critical Minerals
Germany is Europe’s largest economy and a global leader in manufacturing and innovation. However, it relies heavily on imports of critical minerals, mostly from China, which dominates the global market.
According to a report by the German Mineral Resources Agency, Germany imported 100% of its cobalt, lithium and rare earths in 2020, and 97% of its copper. These minerals are vital for the country’s automotive, electronics, aerospace and renewable energy sectors.
The report also warned that the demand for critical minerals will increase significantly in the coming years, driven by the transition to a low-carbon economy and the digital transformation. For instance, the demand for lithium, which is used in electric vehicle batteries, is expected to grow by 965% by 2030.
However, the supply of critical minerals is subject to various risks, such as geopolitical tensions, trade disputes, environmental and social issues, and price volatility. The report urged Germany to diversify its sources and invest in domestic and international projects to secure its long-term access to these strategic resources.
How Germany Plans to Secure Its Supply
The German government has earmarked about one billion euros for the fund, which will be set up for four years. The fund will provide equity capital to acquire minority stakes in projects that are aligned with the EU’s criteria for critical minerals.
This will target projects in extraction, processing and recycling of these minerals, both in Germany and abroad. The fund will also seek to cooperate with other European initiatives, such as the European Raw Materials Alliance and the European Battery Alliance, to create synergies and leverage resources.
One of the potential partners for the fund is the Japan Organization for Metals and Energy Security, which has been investing in the storage, exploration and acquisition of critical minerals since 2004. Japan is another major importer of these minerals and has similar interests as Germany.
The fund will also support research and innovation in the field of critical minerals, such as developing new technologies, improving efficiency and reducing environmental impacts. The fund will also promote education and awareness on the importance of these minerals for the German economy and society.
A Step Towards a Sustainable Future
The fund is part of Germany’s broader strategy to achieve a sustainable and resilient economy, which includes increasing its share of renewable energy, reducing its greenhouse gas emissions and enhancing its digital competitiveness.
By securing its supply of critical minerals, Germany hopes to strengthen its industrial base, foster innovation and create jobs. The fund will also contribute to the EU’s goal of becoming a global leader in green and digital technologies, as well as a strategic partner for developing countries that produce these minerals.
The fund is expected to make a statement about its role and objectives at its annual news conference next week on Feb 7.
Source: Mining.com
