It is often said that the EU’s mills grind slowly. However, when it comes to raw materials, the union of states seems to be in no hurry. You may have already read about it in the media: the EU Council, the EU Parliament and the EU Commission recently agreed on the design of the so-called Critical Raw Materials Act.

In March, the Commission had proposed this initiative. Within a few months, the Critical Raw Materials Act is now almost a done deal. For the EU, this is a record pace. No wonder, since the package of laws is considered one of the most important geostrategic projects for Europe – and not least for you as an investor.

Important raw materials: what the EU is planning But first things first: the most important goal of the Critical Raw Materials Act is diversification of raw material procurement. European countries should therefore become independent of individual suppliers. This should mainly be about countries whose governments are classified as dubious and which present a high political risk. These include, for example, Russia and China.

Specifically, no more than 65 percent of the EU’s demand for particularly important raw materials may be obtained from a single third country in the future. This regulation should apply from 2030 and affect 17 „strategic“ raw materials. Previously, the EU had compiled a list of 34 „critical“ raw materials that you can see below. The yellow-background raw materials are classified as „strategic“:

Source: Council of the European Union (https://www.consilium.europa.eu/de/infographics/critical-raw-materials/)

What is clear: all these raw materials are decisive for the functioning of the economy. Many of them are even indispensable for coping with the energy transition, for expanding computer technology or for innovations in the military area.

Precarious dependence, among other things on China At the same time, the EU is partly massively dependent on external states for these „strategic“ raw materials – for example rare earths, nickel, cobalt, lithium, silicon, gallium and germanium. For example, world market leader China had recently established stricter export controls, among other things for rare earths, gallium and germanium, which are important for electromobility, wind turbines and chip production. The supply security of the EU is therefore more than ever on a knife’s edge.

To give the domestic economy additional security, the EU also wants to intensify raw material extraction within EU countries. As of the early 30s, 10 percent of the primary demand for „strategic“ raw materials must be mined in the Member States themselves. And 25 percent of the demand should come from recycling. The target for processing capacities, on the other hand, is 40 percent.

Approval procedure: EU pressing ahead In order to achieve this, the EU intends to create economic incentives and improve the planning security of companies. For this purpose, Brussels, among other things, strives for central contact points for economic operators.

Last but not least, the approval procedures are to be made more efficient. Currently, it takes up to 15 years in the EU from the discovery of mineral resources to final mining. This extremely long period of time should be reduced to a maximum of 27 months in the future. The deadline for new processing and recycling capacities is 15 months.

In order to make this possible, the EU is pushing for a significant shortening of environmental reviews, among other things. These had significantly slowed down the approval processes in recent years, also because local population groups had often resisted.

Incidentally, the Critical Raw Materials Act has not yet been officially adopted. This requires the explicit approval of various EU institutions. Experts, however, see this as merely a formality.

My conclusion for you: possible beneficiaries As an investor, you can draw interesting conclusions from the EU’s measures. Companies that mine, refine or recycle raw materials within the Union should therefore benefit. The catch: since buyers will be forced to buy certain amounts from EU countries in the future, the suppliers could demand premiums for their products. This would boost the profit margins of the respective raw material companies.

Among the possible beneficiaries are Imerys (lithium from France), Vulcan Energy (lithium from Germany), First Quantum Minerals (copper from Spain), Norsk Hydro (aluminum from several European countries) and Umicore (metal recycling, among others in Belgium and Germany).

Also note that EU buyers must diversify their deliveries from non-EU countries. For rare earths, for example, buyers will be limited in their purchases from China from 2030. Non-Chinese providers will benefit from this – such as Lynas Rare Earths (Australia).