Amid Europe’s drive for sustainability and autonomy, Sweden emerges as a rare metals pioneer aiming to challenge China’s dominance..Europe needs stable rare-metal supplies for climate goals, geopolitical risk reduction. China’s dominance prompts Europe to reassess mining, processing needs.Sweden aims to play a strategic role in Europe’s rare metal diversification.
For
Europe to reach its climate and sustainability goals while reducing
geopolitical risk from dependence on a single autocratic superpower, it needs a
stable supply of rare metals. Sweden, a rare earths pioneer, seeks to play a
strategic role.
“Lithium
and rare earth metals will soon be more important than oil and gas,” European
Commission President Ursula von der Leyen said in her 2022 State of the
European Union address. This displayed an awareness in Brussels that to stay
relevant, the bloc must overcome bureaucracy and think geostrategically
regarding critical mineral supply chains.
Europe,
while countries worldwide are de-risking from China, is reassessing the
importance of mining and mineral processing. In March 2023 the EC presented its
proposal for the European Critical Raw Materials Act, a regulatory framework
for the safe and sustainable supply of critical raw materials. In December, the
European Parliament approved it; the act was adopted by the European Council in
March.
To
develop cutting-edge industries, economies need stable supplies of rare metals.
Critical raw materials, including rare earth metals needed for digital
development, security and the green transition, are of growing interest to
great powers; in particular to China and the United States in the context of
their technology race.
This
also applies to the EU. While tensions rise over defense and economic policies
between democracies and authoritarian states, it is possible that major powers
will try to secure their access to rare metals by entirely different methods
than the conventional trade practices of the globalized world. This creates a
significant risk of a resource war for strategic raw materials.
According
to the International Energy Agency (IEA), annual demand for various critical
metals and minerals will increase from roughly 7.5 million tons in the 2020s to
28 million tons by 2040. In a scenario aiming for net-zero emissions in 2040,
the IEA’s forecast surges to 43 million tons.
These
materials are used in semiconductors, monitors, lasers, camera lenses,
catalysts, strong permanent magnets, batteries and nuclear power rods, as well
as in cancer treatment and in equipment for X-ray and bone density diagnostics.
Europe’s
rare earth sourcing
Today,
the EU imports the metals primarily from China, which is by far the world’s
largest extractor and refiner of rare earths. This, however, is problematic for
several reasons. Production in China poses risks both for the environment and
human health. It also jeopardizes the EU’s sustainability goals, since the
necessary production – for example, of wind turbines and batteries for electric
cars – is completely dependent on China. As a result, rare earth metals are now
on the EU’s list of raw materials at risk of becoming scarce.
However,
there are also large deposits of rare earths outside of China. One of the
world’s largest deposits is in the self-ruling Danish territory Greenland.
While its land mass contains high levels of sought-after uranium and thorium,
reaching them is a problem. Greenland’s government has prohibited uranium
mining and the exploration for other metals in rocks with more than 100 parts
per million of uranium.
If the
EU is to have some degree of autonomy, it must hurry to secure access to
deposits of the 17 rare earth elements (REE) and several other metals which the
EC classified as “critical” materials in 2011 because of their economic
importance and because China’s dominance creates uncertainty. That quest leads
to Sweden.
Sweden
and rare metals, then and now
In the
late 18th and early 19th centuries scientists began to discover rare earth
elements. A large number were actually discovered by Swedes. But only recently,
with the development of modern technology, have such metals become important.
The
first known discovery of rare earth metals was at the end of the 18th century
when a black mineral with elements unknown was found in pegmatite in the
Ytterby mine outside Vaxholm in the Stockholm archipelago. The world’s likely
first mining of rare earth metals in solid rock took place in the mid-19th
century in Bergslagen, roughly 200 kilometers west of Stockholm. At this mine,
the first light REE, cerium, was discovered and described in 1804.
Today,
with industry and transport becoming increasingly electricity-based, and as
supercomputing and security systems grow both in complexity and in their use of
rare earths, Sweden is looking to build on its REE pedigree as a long-term
alternative to China.
The most
advanced commercial project is Norra Karr (east of Lake Vattern), where rare
earths occur in a nepheline syenite (a plutonic rock similar in appearance to
granite). Norra Karr is promising economically, thanks to high concentrations
of the most sought-after rare earth metals, and environmentally, due to very
low uranium and thorium concentrations. According to Swedish state-owned mining
company Luossavaara-Kiirunavaara AB, or LKAB, there are more than 1.3 million
tons of rare earth metal oxides in the country’s northern reaches, making it
Europe’s largest deposit.
But
opening a mine is a lengthy process fraught with difficulties. In addition to
building infrastructure, social and environmental impact assessments must be
completed before permits can be issued; a process that can take 15 years. There
are also technical challenges. The REEs in Kiruna are bound in apatite, a
phosphorus mineral that occurs in iron ore. To facilitate the extraction
process, in November 2022, LKAB acquired the Norwegian company REEtec, which is
developing a new method for extracting and separating REEs from substances like
apatite.
Accessing
the rare earths in Europe has the added dimension of anti-mining initiatives
and significant bureaucratic hurdles. The EU needs to streamline approval
processes of strategic resource projects required to achieve some independence
from China. It is also still uncertain whether LKAB’s REE deposits in Kiruna
can actually reduce dependence on China.
Furthermore,
mining is only the first step in the supply chain. A new European mine does not
reduce supply risks if the EU still depends on processing in China – an
economic and military superpower that is neither democratic nor recognized as a
market economy by the EU. China’s dominance is primarily in the technologies
and facilities needed to transform the raw materials into the sophisticated
intermediate products demanded by high-tech manufacturers further downstream.
China’s
strategy for rare earths
In
recent years, China’s share of global mineral extraction has declined somewhat,
but for countries with advanced manufacturing industries, it is not the mineral
– what is mined – that is considered most “critical.” What is critical and in
demand are the advanced, processed products derived from the raw materials. One
example is permanent magnets, which are important components in electric
vehicles and wind turbines. Dependence on China is twofold: China dominates
both the production of metals and the production of the permanent magnets in
which the metals are included.
The
reasons for China’s dominance are complex and involve the cooperation of other
countries. Mining and processing of metals can be damaging to the environment,
socially unacceptable and unprofitable, especially in the short term. But with
Chinese Communist Party financial backing, Chinese companies are assured of
long-term support in their activities. In the West, high environmental
requirements and labor costs result in higher production costs and prices. For
many in the West in past decades, it was more profitable to simply import
materials from China than build out their own supply chains.
China
recognized the potential of REEs early on. In the late 1980s, when the U.S. was
still the largest producer of REEs, China’s then leader Deng Xiaoping said:
“The Middle East has oil, China has rare earths.”
REE
export limitations
China
has been accused of exploiting its control of REEs for geopolitical purposes.
During a 2010 territorial dispute with Japan over the Senkaku Islands in the
East China Sea, China reportedly halted exports of REE oxides to Japan. Beijing
denied a ban aimed at Japan, claiming that the change was part of a previously
planned reduction in export quotas. The incident spurred Japan to diversify its
supply chains, which appears to have succeeded. Between 2010 and 2018, China’s
share of Japan’s REE imports decreased from over 80 percent to 58 percent.
More
recently, China restricted the export of certain commodities in 2023, citing
national security interests. In August, export controls were introduced on
gallium and germanium, two raw materials used in the production of
semiconductors. In October, permit requirements were introduced to export
selected graphite products, with Beijing citing their military importance.
Of
specific concern for Sweden, and Europe, is that since 2020 China has stopped
issuing permits for the export to Swedish companies of artificial graphite – a
material used in the production of battery cells – without explanation. The
measure has been viewed as an attempt to inhibit the development of Europe’s
fast-growing battery industry, where Sweden is at the forefront.
In
November 2023, China introduced stricter export controls for REEs and for the
next two years Chinese exporters must report both material type and export
destination. According to analysts, China is considering introducing yet more
extensive measures to further limit exports of REE-related technology.
Scenarios
In the
event of a diplomatic conflict or trade dispute between the EU and China,
Beijing could double down on export bans on selected REE products for European
companies. An export ban aimed at the entire EU seems unlikely, as it would
have serious economic and political consequences for China as well. But a ban
for individual countries and sectors within the EU – for example, Sweden and
the automotive industry – would be more plausible. This makes Sweden and the
future of Europe’s EV industry vulnerable to Chinese export restrictions.
Scenario
1: Legacy supply chains put Europe increasingly at risk
If
Europe fails to diversify, which is realistic in the short to medium term due
to entrenched European bureaucracy and China’s lead in all stages of the value
chain, it puts environmental, climate, economic and security priorities at
risk.
In
potential crisis situations, for example a Western response with European
support to an armed conflict over Taiwan, or Russian influence into Chinese
policymaking leading to a deterioration in Sino-European relations, Beijing
would be able to cut off European access to rare metals, exerting pressure on
EU security policy and imposing an economic cost. This risk would lead to both
price and security risks.
Scenario
2: Diversification results in two geoeconomic blocs
If the
EU diversifies sourcing and is willing to pay for the extraction and processing
of rare metals outside of China, it would help create divergent flows of rare
metals, lowering supply and security risks. This not only requires the
cooperation of other countries to develop complementary supply chains, but the
bloc must develop its capacity for processing and manufacturing, so a larger
part of the supply chain is in Europe.
The
result could be one raw materials chain for the West and its partners, and
another for China and those in its realm, dividing the world into different
trading blocs. This would certainly disrupt rest-of-world trade, but looks
increasingly likely given other geopolitical signals.
https://www.gisreportsonline.com/r/sweden-critical-materials-europe/
***Ewa
Björling holds positions as a professional board member in several companies,
including Essity AB, Nynas AB and Xolaris AB. She also serves as the chairman
of the Prevention of Antibiotic Resistance (PAR) Foundation. In addition to her
board roles, Ms. Björling possesses extensive experience as a mentor, having
mentored individuals in both the political and business communities in Sweden.
She is actively engaged in various networks providing advice on international
affairs.
Ms.
Björling’s career includes her tenure as the Minister for Trade (2007-2014) and
Minister for Nordic Cooperation (2010-2014) in the Swedish government. She is a
former member of that country’s Moderate Party. Her accomplishments during this
period include enhancing export financing, supporting small and medium-sized
enterprises, and reforming Sweden’s global promotional efforts. She played a
pivotal role in the merger of Invest Sweden and The Swedish Trade Council to
create Business Sweden, streamlining the promotion of the country’s exports,
imports, and investments. On the European front, she contributed to initiatives
such as the European patent, the service directive, the goods package, the
development of e-commerce, and numerous free trade agreements within the EU
framework.
Ms.
Björling served as a Member of Parliament from 2002 to 2014, where she was an
active member of the Committee on Foreign Affairs. She also founded and chaired
the Swedish-American Parliamentarian Friendship Association. Her role on the
Board of the Swedish International Development Cooperation Agency involved
coordinating aid for developing nations.
Before
entering politics, Ms. Björling worked as a PhD and Associate Professor at the
Karolinska Institute in Stockholm. During this time, she lectured in the field
of Medicine and led her own research group specializing in virology.