EU-Backed Group Warns of Expensive Critical Metals Stockpiling

Article content

(Bloomberg) — Stockpiling and creating price floors for critical minerals in Europe to cut reliance on China could be costly for governments, and the region needs price benchmarks to spur output, a European Union-backed group warned.

Article content

The US has pushed partners including the EU to agree on price floors — which guarantee minimum levels for producers that can’t be undercut by Beijing — amid efforts to diversify supply chains of minerals key to the energy transition and sectors like aerospace and defense. The bloc plans €3 billion ($3.5 billion) in spending this year to loosen China’s grip on supplies, and the creation of a new body to oversee investments and build stockpiles.

Article content

Article content

Article content

But any such measures will likely be a challenge, according to EIT RawMaterials, an EU-funded group that helps secure critical minerals supplies. That’s because some prices in places like Europe are much higher than in China, partly as supplies are more scarce and Europe’s market is opaque, meaning governments may have to absorb part of the price difference for purchases.

Article content

Article content

“Although stockpiling and floor pricing are definitely not the final solution — it can become very expensive for taxpayers — it might be a transformative measure that you have to undertake,” EIT RawMaterials’ Chief Executive Officer Bernd Schaefer said in an interview in Brussels.

Article content

Critical minerals are one of the main areas of cooperation between the EU and Washington under the Trump administration. They earlier this year agreed an action plan and are exploring a trade initiative with other nations to curb China’s influence. Prices of many critical minerals are typically set in China, which has a strong grip on refining capacity and has used its exports as leverage in political disputes.

Article content

The EU is among those that have said price floors could be part of a broader toolbox, which also includes measures like off-take agreements with companies that guarantee a level of purchases. Schaefer said some of those steps aren’t sustainable in the long term, and that developing European pricing benchmarks for critical minerals would spur off-takes and investment.

Article content

Article content

EIT RawMaterials is working with Metalshub — a platform that lets users source and supply metals — to better determine prices in Europe, where many mining and refining projects have struggled to raise financing. Metalshub said gathering more spot data will help with the creation of price indices.

Article content

“If you don’t have a liquid and transparent market, the risk of wasting money ultimately as a government, as a legislator, is extremely high,” Metalshub co-founder Frank Jackel said. “I don’t understand how any of the governments would go into stockpiling without price transparency.”

Article content

Cerium, antimony and vanadium are among the metals traded on Metalshub. It has also expanded its battery materials network, with Jervois Finland recently joining to sell cobalt sulfate.

Article content

“We need to create these very transparent markets, otherwise investment will not flow into those markets,” Jackel said. “Private investors need some kind of clarity of what they are investing into.”

Article content