The largest European economy is not doing well – it is currently stagnating. There is also another problem: Germany is increasingly dependent on importing essential raw materials.
The important raw materials that Germany imports include copper, lithium, and so-called rare earth elements (REE) – scandium, cerium, promethium, terbium, and thulium, as well as twelve other elements. These rare metals are not actually that rare (the rarest, thulium, is more common than gold), but they are rarely found in quantities that make mining economically viable.
A study published last week by the consulting firm IW Consult and the Fraunhofer ISI institute on behalf of KfW Research (a subsidiary of the German state-owned KfW bank) addresses these imports and examines their significance for value creation and employment in Germany. The study focuses in detail on copper, lithium, and rare earth elements because they are crucial for key and future technologies.
According to the study, nearly a third of the gross value added in the manufacturing sector depends on the production of goods containing copper. A tenth of the added value comes from the production of goods containing lithium, and 22 percent from goods containing rare earth elements. Manufacturers of automobiles and their suppliers, as well as producers of electrical, electronic, and optical products, are particularly dependent.
Resource-rich countries have significant market power
In addition to import dependence, there is also the fact that the raw materials market is dominated by only a few exporters who hold significant market power. The largest deposits of rare earth elements are found in China. Deposits in Greenland, Canada, and Sweden are still not sufficiently explored and therefore cannot be quantified.
Nearly a third of Germany’s lithium imports and 19 percent of copper and rare earth element imports are considered risky. When it comes to lithium and rare earth elements, the three largest suppliers have a market share of over 80 percent. Particularly important for the German market are Russia for copper metals and Chile for lithium carbonate, as 72 percent comes from there. In terms of rare earth element imports, Germany imports 84 percent of its needs from China, and this high degree of dependence is expected to continue for a long time.
Dependence
Matthias Wachter, head of the department at the Federation of German Industries (BDI), told DW: “Dependence on many non-energy raw materials from China is already greater than it was on gas from Russia.”
The import of mining, refining, and trade products, for example, is associated with “the highest level of risk.” What is risky is “not so much the physical availability of raw materials, but their concentration in extraction, and especially in further processing in China. This makes it vulnerable and open to blackmail. By controlling the export of some rare earth elements, China has already shown that it can turn off the tap where it suits them.”
What needs to be done
“Security of raw material supply requires consideration of the entire chain – from mining to imported semi-finished products.” This is the conclusion reached by Fritzi Köhler-Geib, the chief economist of KfW, the bank that commissioned the study. “Sustainable raw material supply now initially creates costs, but it is a prerequisite for shaping the green and digital transformation.”
“We must not delude ourselves: reducing dependence and building greater resilience does not happen overnight,” says Matthias Wachter. What is crucial is “diversification and the development of new capacities. Strengthening domestic production is part of the solution. Contrary to popular belief, Germany is very rich in many raw materials.”
Cornelius Bar warns that Germany must take measures to “diversify the countries from which it imports, substitute critical raw materials, expand its own resources, and strengthen recycling. The prerequisites for this are suitable location conditions (e.g., energy costs) and acceptance among the population.”
Sourse : DW
