"Raw Material Dependence on China Causes Concern"… EU to Introduce 'Raw Material Supply Chain Security' Bill

[Image source=AFP Yonhap News]

[Asia Economy Reporter Yuri Choi] The European Union (EU), aiming to accelerate the development of the eco-friendly industry, is speeding up efforts to secure raw material supply chains.

According to industry sources on the 18th, the EU Commission is set to announce the legislative proposal for the 'Critical Raw Materials Act' (CRMA) in the first quarter of next year to secure supply chains for critical mineral raw materials.

Ursula von der Leyen, President of the EU Commission, officially expressed her intention to promote the CRMA during her annual policy speech last September, forecasting that the demand for major mineral raw materials will surge by up to 500% by 2030. Specific details have not yet been disclosed.

The EU currently designates 30 items as critical raw materials and manages their supply status. Many of these, including lithium, magnesium, natural graphite, and rare earth elements, have a 100% import dependency. For some items such as magnesium and rare earths, dependence on Chinese products is particularly high.

Concerns over fragile supply chains became a reality as raw material supply was directly impacted by China's 'lockdown policy' during the COVID-19 pandemic. Following the unprecedented energy crisis triggered by the Ukraine war, the EU's sense of crisis has grown, emphasizing that the 'Russian gas issue' must not be repeated in other critical sectors.

It is expected that during the CRMA legislative process, the EU will focus on reducing dependence on specific countries like China by establishing partnerships or development aid cooperation with third countries such as those in South America and Africa. There is also a possibility that measures such as strengthening environmental regulations on raw material production processes or increasing the recycling rate of raw materials will be included.

The South Korean government currently assesses that it is unlikely the CRMA will include discriminatory provisions similar to the U.S. Inflation Reduction Act (IRA), which grants tax benefits only if a certain percentage of minerals are sourced from North America. However, considering the EU's primary goal of reducing dependence on Chinese products, concerns have been raised that Korean companies, whose main export products heavily rely on Chinese raw materials, may inevitably face direct or indirect impacts.