Critical raw materials: what they are and their importance for global industry

At the end of June, the economic ministers of Germany, France and Italy reached a crucial agreement to strengthen their collaboration in the management of critical raw materials. This agreement aims to jointly address the challenges posed by the supply of raw materials. vital raw materials for the industrial sectorThe trio of nations urges the swift resolution of negotiations on the Fundamental Law on Raw Materials in the European Union and the implementation of individual goals for the extraction, processing and recycling of these materials.

This type of raw materials plays an essential role in the modern economy, so it is vital to know what they are, what are the main ones and What impact do they have today?In this article we tell you everything.

What are critical raw materials?

Critical raw materials are essential natural resources that play a key role in the technological and industrial industry. Elements such as minerals, metals and rare earths are indispensable for the creation of advanced products such as electronic devices, electric vehicles, solar panels or wind turbines. This includes metals such as cobalt and rare earth elements such as neodymium, key in the manufacture of powerful magnets for renewable energy technologies.

The term "criticism" is derived from two main factors: Economic importance of these matters and the vulnerability in its supplyIts scarcity, coupled with over-dependence on a few exporting countries, means that its supply is constantly threatened by geopolitical and environmental factors, which could have a devastating impact on the global economy.

China's role in critical raw materials

China controls a significant portion of the global supply of critical raw materials, especially when it comes to rare earth such as dysprosium and neodymium. This position dominated by the Asian giant has generated concern in global markets, since any interruption in supply could affect entire industries. For example, elements such as Lithium, gallium and the tungsten, essential for batteries and high-tech devices, are heavily dependent on Chinese exports.

In response to this situation, the European Union has launched initiatives to reduce its dependence on China, promoting the extraction and local processing, as well as the recycling of critical raw materials. The goal is to create a more sustainable supply chain resilient within Europe that ensures its economic stability and enables progress in the transition towards decarbonisation.

Critical raw materials in the European Union

While oil and gas have historically been vital materials, the energy transition towards cleaner technologies has raised the importance of critical raw materials. In 2020, the European Commission formally included around 30 materials on the list of critical raw materials, tripling the number since 2011.

Led by elements such as the Lithium and the graphite, these materials are essential for the creation of batteries and electric vehicles, and their availability will be key to meeting net-zero emissions targets across the region. The European Commission has launched a public consultation on the European Critical Raw Materials Act, which aims to encourage responsible extraction within the EU and ensure the continuity of their supply.

Dependency and geopolitical challenges

China's dominance is not the only challenge facing Europe. Other key producing countries, such as the Democratic Republic of Congo (which houses the largest reserves of cobalt of the world) and Russia, also play major roles in the global supply of essential raw materials.

The growing demand for electrification and decarbonization is leading to a world race among the strongest economies to secure a share of the supply of these materials. Although some European countries, notably Spain, have indications of deposits of several critical raw materials, many of these are not being exploited due to the social opposition and the environmental risks involved in mining. This lack of exploitation adds to concerns about future supply.

Strategic raw materials and Latin America

Latin America figures prominently in the production of raw materials, particularly lithium. The region is home to the well-known lithium triangle (located between Chile, Bolivia and Argentina), which represents more than 75% of global reserves of this mineral. In this context, the role of Latin America in the global supply is crucial for the energy transition.

However, the exploitation of these resources poses social and environmental challenges significant. Countries such as Peru and Chile are key in the production of copper, another essential material for electrification. But the lack of research and development in many of these countries is a worrying indicator, since exploitation without proper management will not contribute to the sustainable development of local economies.

Possible formation of an OPEM: Will mineral-rich nations unite?

An issue that has repeatedly arisen is the possibility of a Organization of Metal Exporting Countries (OPEM), similar to what OPEC is for crude oil. Countries such as China, the Democratic Republic of Congo, Australia and South Africa could form a bloc that would control the supply of crude oil. critical metals, capitalizing on global demand.

While this might stabilise prices for producing countries, the consequences for importing nations would be devastating. Europe, Japan, South Korea and several other developed economies would suffer cost increases and disruptions in their supply chains. This raises questions about how they should manage their diplomatic relations with these mineral-rich nations to prevent the formation of a possible cartel.

Environmental impact and global justice

The growing demand for critical raw materials is not only driving the global energy transformation, but is also generating a unprecedented environmental and social pressure on producing countries. The extraction of minerals such as cobalt, lithium and nickel entails a high environmental cost, from the massive deforestation to the contamination of water sources.

On the other hand, poor working conditions and human rights violations in regions such as the Democratic Republic of Congo are an alarming reminder of the contradictions of the energy transitionThe challenge for developed countries will be to find a balance between sustainable mining, social justice and energy transition.

La urban mining is an alternative that is gaining ground in Europe, with the recovery of valuable metals from discarded electronic devices. Recycling, combined with urban mining, can reduce primary extraction and relieve pressure on producing countries, while moving towards a more circular economy.

There is no doubt that the importance of critical raw materials will continue to grow in the coming years, and the decisions countries make today will determine the success or failure of the global energy transition.