The EU is considering legally forcing industries to reduce purchases from China to insulate Europe from future hostile acts, the industry commissioner, Stéphane Séjourné, says.
He made his remarks as the European Commission unveiled a €3bn (£2.63bn) strategy to reduce its dependency on China for critical raw materials amid a global scramble caused by Beijing’s “weaponisation” of supplies of everything from chips to rare earths.
The ReSourceEU programme will seek to de-risk and diversify the bloc’s supply chains for key commodities with a funding initiative to support 25-30 strategic projects in the sector.
It will include new rules to stop scrap aluminium leaving the bloc, recycling of magnets used in car batteries and a new €2bn a year fund backed by the European Investment Bank to support industries diversifying away from cheap Chinese supplies.
Underlining the threats posed by over dependency on China, Séjourné said if industry did not respond, the commission reserved the right to introduce legislation.
“We would force European companies legally to diversify their sources of supply. That is not the case now, and it is not what is proposed in the plan [ReSourceEU] but this is a wake up call, a strong wake up call,” said Séjourné.
The EU said the strategy was designed to reduce the impact of “market shocks” such as the disruption to the car industry caused by the recent, now lifted, ban on exports of chips by China in response to the Dutch government taking control of the Chinese-owned chip firm Nexperia.
The EU trade commissioner Maroš Šefčovič said Brussels remained committed to the concept of open access to its markets but that was being repeatedly exploited to the disadvantage of European industry, leaving it “fire fighting” a succession of crises.
Séjourné said that “for the time being” the EU wanted to “remind” companies as part of the strategy, procurement bosses must communicate with their board of directors on “how they plan to diversify”.
“This is a way for us to gently encourage them to diversify … if this were not the case … We reserve the right to use legislation to simply oblige companies to diversify a certain percentage of their supplies,” he said.
Senior EU officials said that “while the direction is clear” there was a need to “accelerate the process” as China continued to “weaponise” its hold on raw materials for “geopolitical purposes”.
To kickstart the implementation of the strategy, two projects, a molybdenum extraction in Greenland and a lithium mine in Germany will get immediate funding.
The EU will also look at financial support to enable companies to buy from more expensive sources than China and it will set up a “raw materials platform” that will pool company orders and build joint stockpiles.
New restrictions will be introduced on scrap exports in 2026 of the metal and of scrap copper if necessary.
Demand for lithium is expected to increase nearly sixtyfold by 2050. More than 78% of the EU’s lithium needs in 2020 came from Chile. Photograph: Luis Bustamante/The Guardian
Illustrating the scale of the reliance on Beijing, EU officials revealed that the bloc buys about 20,000 tonnes of permanent magnets a year, used in everything from car and fridge doors to MRI machines.
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Of that, “17,000 to 18,000” tonnes come from China, 1,000 are produced in the EU with the remainder from other countries.
Up to €3bn in funding will be mobilised within the next 12 months, with €2bn a year made available by the European Investment Bank in the form of loans, venture debt and private debt plus financing such as loans already issued to a Finnish lithium mine project Keliber.
This dwarfs the £50m announced last month by Keir Starmer for a similar initiative in the UK.
Efforts by the US, the EU and the UK to reduce dependency on China for supplies took on a fresh urgency in October when China threatened to introduce fresh global restrictions exports of rare earths from December.
That threat was lifted as part of the tariff deal struck between Xi Jinping and Donald Trump in South Korea six weeks ago, but the reprieve holds for only 12 months, preserving China’s future leverage on supply chains.
Europe’s only lithium hydroxide factory, operated by AMG Lithium in Germany, cost £150m to build, and the company was already in the mining business.
Earlier this year, its chief executive, Stefan Scherer, said that the EU might as well “apply to be a province of China” so little was being done in practice to cut reliance.
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