Rare earths: The federal government wants less dependence on China

Status: 07/26/2022 07:12

The German economy is heavily dependent on China to import rare earth elements – a risk, according to trade experts and federal president Steinmeier. The government wants more publicity among suppliers.

Author: Dietrich Karl Mäurer, ARD Capital Studio

In a speech in Hamburg earlier this month, federal president Frank-Walter Steinmeier warned that neither China nor any other country should be the only partner in the long run, be it energy, intermediates or raw materials: “We must ensure, that we cannot be blackmailed in any country in the world. Therefore, we now need to find new partners and recalibrate our political and economic relations. ‘

Perhaps the federal president also meant 17 special metals, such as scandium, yttrium and lanthanum. Rare earth substances are needed, for example, for the production of smartphones, LED lamps, electric motors or wind turbine magnets.

China with a monopoly

China has a market monopoly on rare earth elements. Risk, says Lisandra Flach, head of the ifo Foreign Trade Center in Munich. She has just examined the extent to which key technologies in Germany are dependent on imports: “Rare earths are classified as critical raw materials as there is a high market concentration in terms of the number of suppliers. China has the largest reserves in the world and is also the world’s most important exporter. And now the German economy is heavily dependent on imports from China.

Dependency is particularly high in the case of battery technology, robotics and renewable energy. The German economy buys rare earth elements from only two of the world’s five largest exporters.

More extensive installation is needed

Flach believes there is an urgent need to position ourselves more broadly, more diversified, because: “A low degree of supplier diversification is associated with a higher risk of delivery failure. And this is the case with rare earth metals. ‘

In addition, there is a price dependency. The problem has been known for a long time – according to the Federal Ministry of Economy: “There is a raw materials strategy in which it is solved. This has also long been a problem for the European Commission. But the diversification of supply sources is in the current situation and impressed with energy policy is once again in the spotlight. “

The federal government, which cannot dictate to companies where and from whom they buy their raw materials, tries to intervene with a package of measures: “One important point, for example, is to reduce trade barriers.” Falling tariffs would also give other suppliers an opportunity. “Then there are various foreign trade instruments, financing instruments – for example, investment guarantees.”

They would help investors to develop raw materials abroad. In addition, there is an ongoing process of more diplomatic support for economic relations.

A spokesman for the Federal Ministry of Economy emphasized very diplomatically: “These diversification efforts are not directed against China.” Rather, it is an overall political effort to establish a wider range of sources of supply.

Rare earths – how dependent is Germany on China?

Dietrich Karl Mäurer, ARD Berlin, 07/26/2022 06:24

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