Key Technologies: How dependent Germany is for raw materials

There are concerns in the German economy because Germany is dependent on imports for so many raw materials – sometimes even more than for gas and oil. Where could that be a problem? An overview.

Representatives from politics, industry, science and civil society are discussing Germany’s supply of raw materials at the Raw Materials Congress of the Federation of German Industries (BDI) in Berlin today. From the point of view of the BDI, a secure supply of raw materials is a prerequisite for the green and digital transformation of the economy and society to succeed. It must therefore be considered strategic for national security – but where does Germany actually stand in terms of raw material supplies?

How is the situation?

After Russia’s attack on Ukraine, Germany’s dependence on imports of energy raw materials became “painfully clear”, the BDI said in advance. Due to the reduced deliveries from Russia, there could be a gas shortage in winter. In addition to the expansion of renewable energies and new partnerships, for example in liquefied natural gas (LNG), gas consumption must therefore also fall. According to a study published today by the Potsdam Institute for Climate Impact Research, at least 30 percent would have to be saved compared to the pre-crisis period in order to prevent supply bottlenecks and further rising prices.

BDI President Siegfried Russwurm told the German press agencythat the dependence on critical mineral raw materials – especially from China – is much greater than that of oil and natural gas.

“The race for strategically important raw materials is in full swing. Germany and Europe are in danger of losing important sources of raw materials in competition with other countries. The result: dependencies are increasing,” says Russwurm. Without raw materials there will be no energy transition, no e-mobility or digitization.

How is Germany doing?

In general, Germany is a country rich in raw materials. According to the Federal Ministry for Economic Affairs and Climate Protection (BMWK), above all construction materials such as sand and gravel, broken natural stone or limestone and various industrial metals such as rock salt, quartz sand or fluorspar are extracted from local deposits. In 2019, Germany was the second largest producer of lignite, the third largest producer of raw kaolin, the fourth largest producer of rock salt and the fifth largest producer of potash salt.

For many raw materials, however, the country is heavily dependent on imports from abroad. In addition to energy raw materials, these include metals and industrial minerals such as quartz or graphite, which are at the very beginning of industrial value chains and are needed in many companies. “Here we have areas where we are partly 100 percent dependent on imports. To give an example: We have an almost 100 percent import dependency on China for rare earths,” said Matthias Wachter, head of the International Cooperation, Security, Raw Materials department and aerospace at the BDI, recently in Deutschlandfunk.

The focus is particularly on the raw materials that are important for future technologies. The competition for many of the critical raw materials required for the energy and transport transition, digitization or decarbonization is already in full swing. This drives up the demand for elements such as bauxite, lithium, tungsten, gallium, germanium and rare earths. These minerals are almost indispensable for the future projects of the industry, they are also considered the “gold of climate change”. For example, they are required for electric batteries, microchips and wind turbines.

Which raw materials are critical?

The European Commission defines a total of 23 raw materials as crucial for the production of key technologies such as battery technology, robotics and renewable energies. The Munich ifo Institute sees an urgent need for action in Germany for nine of them. A study commissioned by the IHK identified the import of cobalt, boron, silicon, graphite, magnesium, lithium, niobium, rare earths and titanium as supply chains prone to crises.

“More sources of supply are needed here to make the supply chains more resilient,” said Lisandra Flach, head of the ifo Center for Foreign Trade. Especially in times of supply chain problems and geopolitical tensions, there could otherwise be a shortage of imported raw materials, which according to the ifo are “essential for Germany’s future viability”.

Accordingly, there are major dependencies, since Germany is only supplied by a few countries. For example, German companies only purchase rare earths from two of the world’s five largest exporters. The market concentration of monopolies like China is a big risk – especially when demand is exploding at the same time.

How high is the demand for critical raw materials?

According to the EU Commission, the demand for critical raw materials will double by 2030. The World Bank even expects demand for metals and minerals to increase thirtyfold over the next 30 years. In order to cover these quantities, more than three billion tons of the raw materials would have to be dug in the period. The International Energy Agency (IEA) expects demand for individual minerals such as lithium to increase by a factor of forty.

Lithium is a key raw material for modern storage technologies and is therefore essential for e-mobility. The experts at the German Raw Materials Agency estimate that funding will have to be increased globally by a factor of four to seven in the coming years so that the switch to electromobility can be successful. Lithium-ion batteries are also installed in smartphones, PCs and tablets. As a result, the price of the element has increased almost eightfold since the beginning of last year. According to the Natural Resources Agency, 75 percent of the lithium production capacity is in Chile and Australia.

Where are the problems?

In addition to the drastic dependency and the high demand, there are other hurdles in the safe and sustainable procurement of raw materials. Geopolitical risks and lower standards in many resource-rich countries compared to Europe are also a problem.

For some non-replaceable raw materials, the countries of origin are classified as critical. According to the RWI – Leibniz Institute for Economic Research, nickel and palladium – which is used in catalysts, among other things – is about Russia, cobalt – which is used for batteries and alloys – about the DR Congo and China as suppliers.

But the domestic extraction of raw materials is also causing more and more problems. “Basically, Germany has enough mineral raw materials, especially for the raw materials gravel, sand, gypsum, clay, limestone and natural stone that are important for the construction industry,” says a position paper by the German construction industry and the Federal Association of the Building Materials Industry (bbs), from which the “Handelsblatt” reports.

However, while demand remains stable, “needs-based securing of raw materials is becoming increasingly difficult”. One reason for this is the geological distribution of the deposits: according to the associations, buildings, protected areas or agricultural land are blocking the way. In addition, there are high regulatory hurdles and planning and approval processes that are too long.

What are politics and business doing about it?

The security of supply for critical raw materials is moving back into focus. At the beginning of 2020, the former Economics Minister Peter Altmaier (CDU) presented the federal government’s raw materials strategy. Robert Habeck (Greens) would also like to become more independent. And the EU Commission also wants to pass a law with the so-called “Raw Materials Act” that is intended to reduce the risk of bottlenecks.

German industry recently presented a five-point plan to strengthen the supply of critical raw materials – including domestic raw material mining. Specifically, the BDI proposes promoting domestic mining and making it “socially acceptable”. “Every tonne of domestic raw material extraction reduces dependency on imports and strengthens Germany’s resilience and security of supply,” says a paper. Mining must be made possible in terms of spatial planning, planning and approval processes must be accelerated.

What else could help?

The BDI paper also states that international raw material cooperation and the mining of critical raw materials abroad should be promoted. Rare earths come mainly from Asia: in addition to China, Myanmar and Thailand are also major producers. Vietnam also has high untapped deposits, which could reduce Germany’s dependence on the market leader.

The ifo analysis shows that there is also untapped potential for diversification with other commodities. In the case of cobalt and titanium in particular, there are some exporters with whom Germany could increase trade in order to make the supply chains more crisis-proof. In addition, the EU must promote the conclusion of trade agreements with these countries – also in Europe. Mining sites for rare earths were recently recognized in Sweden, Finland and Portugal.

The circular economy could also be part of the solution. That would not only reduce Germany’s dependency, but also protect the climate. So far, the EU does not even recycle one percent of rare earths. “With some strategic metals or so-called technology metals such as tantalum and the rare earths or magnesium, there are really still unused material flows for recycling,” said Britta Bookhagen, head of the recycling raw materials department at the German Raw Materials Agency, recently tagesschau.de.