IFO Institute | For many key technologies, such as battery technology, robotics, and renewables, Germany is dependent on imports of raw materials – often from individual supplier countries like China. “Urgent action is required to ensure that the supply chains for nine critical minerals – cobalt, boron, silicon, graphite, magnesium, lithium, niobium, rare earths, titanium – are crisis-proof. Additional sources of supply are needed to make the supply chains more resilient,” says Lisandra Flach, Director of the ifo Center for International Economics, in summarizing the findings of an ifo study conducted on behalf of the Chamber of Industry and Commerce for Munich and Upper Bavaria. The paper was published today in conjunction with the Association of German Chambers of Commerce and Industry (DIHK). According to the study, supply chain disruptions for the abovementioned minerals are particularly problematic because establishing alternative sources can happen only over the long term. The study also states that this is a lesson learned from the most recent upheaval to supply chains in the wake of the coronavirus pandemic and geopolitical crises such as the Ukraine war.
“Ensuring the supply of raw materials is essential for digitalization and the energy transition. Companies must ramp up their efforts even more to maintain varied, resilient supply chains for critical raw materials,” says Manfred Gößl, CEO of the Chamber of Industry and Commerce for Munich and Upper Bavaria. He adds that this is also a job for the German government and the EU, because many of these raw materials are found in autocratic states and SMEs take major business and legal risks to procure them directly. “The supply chain acts proposed for Germany and for Europe will make procurement even more difficult. If policymakers fail to implement suitable measures, these acts could allow commodities traders outside Germany and the EU to increase their market dominance and buyers’ dependence on them still further. Moreover, recycling of raw materials on an industrial scale will have to play a bigger and bigger role in order to make better use of existing resources,” Gößl says.
Study author Flach emphasizes that China is one of the largest suppliers of seven of the nine particularly critical commodities, and in some instances dominates the market. She cites this as a reason to quickly strengthen existing trade relationships with other countries; for example, with Thailand and Vietnam for rare earths, and with Argentina, Brazil, the US, and Australia for other critical raw materials. An expert in foreign trade, Flach emphasizes that measures must be taken to make supply chains for the majority of the 23 critical raw materials examined in the study more resilient.
The DIHK Head of Foreign Trade, Volker Treier, sees potential in better EU-wide coordination, in strategies for improving the distribution of raw materials within the EU, and in a common foreign trade policy: “Many EU countries have options when it comes to critical raw materials. We can jointly take steps to improve access . What’s more, the EU must use trade and investment agreements as well as strategic partnerships to help companies tap new and sustainable sources of raw materials around the world, especially with the Mercosur countries, Indonesia and India.”