Europe faces economic challenges to revive its domestic mining sector
The race for metals and minerals amid growing demand for green products and green technologies may erode European resistance to local production of critical minerals, but this is not going to be an easy way to revive Europe’s domestic mining sector.
The Financial Times published an article on Tuesday stating that Europe will restart magnesium mining for the first time in more than a decade, as the EU attempts to reduce its reliance on imports of critical raw materials from China. Verde Magnesium, a Bucharest-based company backed by US private equity investor Amerocap, intends to invest $1 billion in a disused magnesium mine in Romania.
Europe’s mining sector has slumped in the past few decades partly due to local concerns about the environment, but now, the sector has embraced new opportunities. While demand for critical raw materials is projected to increase drastically, Europe heavily relies on imports.
Against this backdrop, politicians in Europe have consistently emphasized the importance of increasing the sustainable supply of critical materials.
It is understandable that Europe eyes a revival of its mining industry to support the green and digital transition. Brussels is clear about its green ambitions. Under its Critical Raw Materials Act, the EU has set targets for some strategic raw materials: the bloc should be mining at least 10 percent of its annual requirements by 2030, as well as recycling 25 percent and processing 40 percent of its needs.
The most difficult and important measure will be enabling the establishment of more mines. The continent faces serious challenges: mining in Europe is more expensive than in many of its international competitors. If this issue cannot be resolved, the EU may find a roadblock standing in its way.
These are ambitious goals indeed, but the double-whammy of high production costs and low efficiency may put them beyond reach.
First, the EU mining industry faces multifaceted challenges such as high labor costs and stringent environmental policies that impede its ability to meet escalating demand.
Second, although the EU has publicly committed to a clean mining sector, the process of technological advances and creative innovation is painfully slow versus the breakneck stampede to invest in critical mineral supply chains, after a long period of stagnation.
Third, energy prices in Europe are still high, which will raise the cost of operating miners’ fleets of dieselpowered trucks and other mechanical equipment.
While the role and importance of the mining sector have been stressed, the EU’s economic system is no longer suitable for low- and mediumend industries such as mining, refining and processing.
As global enterprises race to a clean-energy future, investors are pouring billions into these sectors and it is clear that miners in Western countries want to get a piece of the pie.
We welcome benign competition, as it is good for the development of the industry. More efforts should be made by Western countries to revitalize the mining
industry.
China is one of the biggest producers of many critical minerals, and, undoubtedly, Chinese enterprises have rich experience in the mining and processing industries, and some of them have sufficient funds for overseas investment.
China has never been afraid of competition, but competition should be fair and rules-based. Now the green and digital transition worldwide comes with great potential for cooperation on critical minerals.
Protectionism, as well as Western countries’ efforts to decouple from China’s critical mineral supply chain, are the factors that should be criticized. The Critical Raw Materials Act said no more than 65 percent of the EU’s annual needs for each strategic raw material at any relevant stage of processing should come from a single third country. This kind of restriction, which violates the principle of free competition, is not conducive to the development of the European economy.