Security of supply: How the traffic light wants to secure raw materials

Status: 01/12/2023 04:27 am

Germany is dependent on imports, and there is a great fear of further supply bottlenecks. A more active raw materials policy should prevent this. Other states have long since gone further.

By Philipp Eckstein, ARD Capital Studio

Supply chains that broke down at times during the corona pandemic, the Russian attack on Ukraine and the energy crisis: recently, many people have realized how dependent Germany is on imports from abroad. In the case of important raw materials, this dependency could grow even further in the coming years.

Many metals and mineral raw materials are required for the energy and mobility transition, which German companies have to buy primarily from abroad. Demand is also growing in other countries. The competition is tough. Companies compete with state actors.

The Federal Ministry of Economics is now planning to play a more active role in the supply of raw materials. At the beginning of the year, the ministry published a key issues paper that complements the federal government’s existing raw materials strategy from 2020.

The goal: Dependencies are to be reduced and at the same time it is to be ensured that German companies will continue to have access to all the raw materials they need in the future, be it copper for wind turbines, lithium, nickel or rare earths for use in electric cars.

How much is left on the market in the future?

Franziska Brantner, Parliamentary State Secretary in the Ministry of Economics, said in an interview with the ARD Capital Studio, the question is “whether there will still be a market in the future”. It is to be feared that in the future companies will no longer be able to simply buy lithium or copper, for example, because these raw materials “are no longer freely available on the market” due to long-term purchase agreements and licenses for individual players.

According to Brantner, this concern is not only of concern to the Ministry of Economic Affairs, but also to many companies and western partners. And that’s why you have to “proceed strategically”.

Incentives and Obligations

Various measures are named in the key issues paper. For example, more raw materials are to be recycled and reused in Germany in the future. There should be financial incentives for this, but also new obligations.

With a fund, the Ministry of Economic Affairs would like to financially support raw material projects in Germany, the EU and worldwide. Domestic mining is to be expanded. Companies should be encouraged to store more critical raw materials with tax breaks. It should also be checked whether state storage makes sense. Dependencies in the supply chains should be monitored more closely and reduced through strategic cooperation with partner countries.

Companies are asking for government support

Franziska Erdle, General Manager of the Metal Trade Association, welcomes the plans of the Ministry of Economic Affairs. “We would have wished for action in this direction much earlier,” she says ARD Capital Studio. There have been state players such as China on the raw materials market for many years. With these, the member companies of their association “could not compete”. It needs support from the federal government.

She is grateful that the topic has reached the management level of the Ministry of Economic Affairs. It takes “both the companies and the federal government to secure the supply of raw materials for Germany and for the entire transformation that we are planning,” said Erdle.

German pent-up demand

The federal government is late. Many states have been pursuing a strategic raw materials policy for years. China plays a prominent role in this. For example, the country is the largest producer of so-called rare earths, which are required for magnets, mobile phones and LED lights, for example.

China also has great market power for magnesium and metal alloys. It’s not just Germany that is “heavily dependent” on raw material imports from China, says Peter Buchholz, head of the German Raw Materials Agency, “but the whole world.”

Some states have responded earlier. For example, the USA, Japan and South Korea have been pursuing a strategic raw materials policy for some time. Green Party politician Brantner concedes that there is “a little catching up to do” in Germany and Europe on the subject. Within the European Union in particular, joint action must now be taken to catch up. The European Commission has already announced a legislative project on critical raw materials. It will be presented soon.

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