"Less than 65% Third-Country Share"... EU Officially Adopts Critical Raw Materials Act

The European Union's (EU) Critical Raw Materials Act (CRMA), aimed at reducing dependence on third countries for key raw materials such as lithium and magnesium, will soon come into effect.

The Council representing the 27 EU member states announced on the 18th (local time) that it has officially adopted the CRMA. The official enforcement will begin 20 days after its publication in the EU Official Journal. This marks the completion of all legislative procedures about one year after the executive branch, the European Commission, proposed the draft in March last year.

Known as the "European version of the Inflation Reduction Act (IRA)," the CRMA focuses on strengthening domestic manufacturing capacity and diversifying supply sources to reduce the dependence on third-country strategic raw materials to less than 65% of total regional consumption by 2030. It is essentially aimed at China, which currently accounts for over 90% of rare earth elements supply, reflecting a high dependence on Chinese products.

By process, the act sets targets to increase domestic mining to 10%, processing and refining to 40%, and recycling to 25%. Once the law is enforced, new mining projects inside and outside the EU will have their permit approval periods shortened to within 27 months, and processing and recycling projects to within 15 months. Additionally, to facilitate smooth financing for domestic companies, the use of EU funds and support from financial institutions such as the European Investment Bank (EIB) will be considered.

Measures to improve supply chain vulnerabilities are also included. According to the CRMA, there are a total of 34 critical raw materials essential for carbon-neutral industries, of which 17, including lithium, are designated as "strategic raw materials." For domestic companies involved in "strategic technologies" such as electric vehicle batteries and renewable energy generation equipment that heavily utilize strategic raw materials, if they have more than 500 employees and global sales exceeding 150 million euros, they must conduct supply chain risk assessments at least every three years. They are also required to develop mitigation strategies to address potential supply disruptions of specific raw materials.

Furthermore, the EU plans to separately set a "minimum recycling usage rate" for permanent magnets (rare earth elements), which are essential for electric vehicles and wind turbine manufacturing, around 2031 through delegated legislation, which serves as an enforcement decree for the CRMA. This is interpreted as a step toward mandating the recycling of permanent magnets. In addition, the law explicitly includes strengthening strategic partnerships with like-minded partners to diversify supply chains.

Unlike the US Inflation Reduction Act (IRA), the CRMA does not currently include explicit discriminatory provisions against non-EU companies such as those from Korea, according to industry assessments. However, since the law emphasizes supply chain security and recycling enhancement of raw materials, there is speculation that additional corporate obligations may be introduced through linked legislation during the full implementation of the CRMA.