Europe vs. China: Supply Chain Battle 💥🛡️

World News

The European Union is contemplating legally requiring industries to reduce their purchases from China, aiming to safeguard Europe from potential future hostile actions, according to industry commissioner Stéphane Séjourné. Séjourné’s comments followed the unveiling of a €3 billion (£2.63 billion) strategy, dubbed ReSourceEU, designed to diminish the bloc’s reliance on China for critical raw materials. This initiative responds to a global competition triggered by Beijing’s alleged “weaponisation” of supplies, encompassing items ranging from semiconductors to rare earths. The ReSourceEU program will focus on mitigating risks and diversifying supply chains for key commodities through a funding initiative supporting 25 to 30 strategic projects within the sector. Specifically, the program includes new regulations to prevent scrap aluminum from leaving the EU, increased recycling of magnets used in electric car batteries, and a dedicated €2 billion annually fund supported by the European Investment Bank to assist industries transitioning away from inexpensive Chinese sources. Séjourné emphasized the dangers associated with over-dependence on China, stating that if industry did not proactively respond, the European Commission retains the right to introduce legislation, potentially “forcing” European companies to legally diversify their supply sources. He characterized the plan as a “strong wake-up call,” noting that the current approach is distinct from the proposed strategy, but highlighting the necessity of addressing this critical issue.

Chinese-owned chip firm Nexperia is facing scrutiny as Brussels remains committed to open access to its markets, though this concept is repeatedly exploited to the disadvantage of European industry, leaving it constantly “fire fighting” a succession of crises. To address this, new restrictions on scrap metal exports, specifically copper scrap, will be introduced in 2026. Magnets, vital components in products ranging from car and refrigerator doors to MRI machines, currently see 17,000 to 18,000 tonnes sourced from China, 1,000 tonnes produced within the EU, and the remainder from other countries. In response to escalating supply chain vulnerabilities, up to €3 billion in funding is expected to be mobilized within the next 12 months, with €2 billion annually provided by the European Investment Bank through loans, venture debt, and private debt, including financing already allocated to the Keliber lithium mine project in Finland. This represents a significantly larger investment – dwarfing the £50 million announced last month by Keir Starmer for a comparable initiative in the UK. The urgency surrounding efforts to reduce Europe’s dependence on China for critical supplies gained renewed momentum in October, following China’s threat to impose fresh global restrictions on rare earth exports starting in December. While this threat was subsequently resolved as part of the tariff deal between Xi Jinping and Donald Trump in South Korea six weeks prior, the agreement offers only a 12-month reprieve, preserving China’s potential leverage over supply chains. Notably, Europe’s sole lithium hydroxide factory, operated by AMG Lithium in Germany and costing £150 million to construct, highlights the strategic importance of securing domestic sources.