As China’s grip on global raw materials tightens, Canada emerges as a promising alternative supplier, but can it fill the gap and meet the EU’s growing demands?
The recent restrictions imposed by China on the export of critical raw materials have sent shockwaves through the global market. The halt on exports of six rare earth elements and certain specialized powerful rare earth magnets will significantly impact the US and EU, highlighting the urgent need for alternative suppliers.
China's export restrictions are regulations imposed on the export of certain goods from China to other countries.
These restrictions aim to control the flow of sensitive technologies, including dual-use items, and prevent their diversion for military purposes.
The restrictions also help protect China's national security interests and maintain a stable global trade environment.
According to the Chinese government, these measures are necessary to ensure compliance with international export control regimes.
Statistics show that China's export restrictions have been in place since 2000, affecting over 1,000 types of goods.
For years, countries have been seeking to reduce their dependence on China for critical raw materials, triggering a global race to secure reliable alternative supplies. ‘We’re in a new era for raw materials,’ said an industry expert. Europe is also coming to terms with the fact that trading with the US has become a risk factor, as it imports several critical raw materials from the US.
China's economic growth has significantly impacted global markets over the past few decades. With a GDP of over $16 trillion, China is now the world's second-largest economy, accounting for about 18% of global trade. Chinese companies have invested heavily in foreign markets, creating jobs and stimulating local economies. The Belt and Road Initiative (BRI) has further solidified China's position as a major player in international trade, with over $1 trillion invested in infrastructure projects across Asia, Europe, and Africa.
Canada has a long mining tradition and around 200 mines extracting various minerals and metals, many of which are classified as critical raw materials. The largest known reserves of rare earth elements are actually located in Canada, according to the Canadian government. However, China‘s influence on Canadian mining ventures is rising, with state-controlled Chinese corporations major shareholders in two of Canada‘s biggest mining firms.
China has become one of Canada's largest trading partners, with bilateral trade exceeding $83 billion in 2020.
China is also a significant source of foreign investment for Canada, particularly in the energy and resource sectors.
Canada has also been an active participant in China's Belt and Road Initiative (Belt and Road Initiative), which aims to promote economic cooperation and connectivity between China and other countries along the route.
Mining projects have long lead times, averaging 15 years from planning to approval and eventual extraction. The unpredictable behavior of US President Donald Trump has created uncertainty in global markets, discouraging investment. However, Canada is now offering tax incentives and funding to promote domestic raw material extraction, presenting an opportunity for the country to become more independent.
The EU should not expect to purchase critical raw materials from Canada in the short term, as many of these resources are already being mined. Nevertheless, Canadian producers may look to the European market for alternative buyers, especially for raw materials that were previously exported to the US. China‘s quasi-monopoly on many critical raw materials remains a significant challenge, and neither the EU nor Canada can become fully self-sufficient in these sectors.
The recent restrictions imposed by China highlight the need for diversification in the global supply chain. As companies seek alternative suppliers, Canada‘s vast reserves of critical raw materials present an opportunity for growth and development. However, the challenges posed by China‘s influence and the long lead times associated with mining projects must be addressed to ensure a stable and secure supply of these essential resources.
