The time of carelessness is over. Germany was world export champion by the grace of Russia, and cheap gas was taken for granted. But since February 24 it has been clear: raw materials are again a weapon in the struggle for the future world and economic order.
The federal government is now doing everything it can to correct the mistakes of the past. While the energy crisis is still being tackled at full speed, the next elephant has long been in the air: the supply of critical raw materials that we need for digitization and climate protection. It determines our future competitiveness.
Today’s program for Germany’s raw material security includes: cobalt, copper, lithium and rare earths. We need them for wind power generators and solar panels, electric motors and power lines. What oil and gas were to the old world, these metals are to the climate-neutral world of tomorrow: irreplaceable.
Hardly any other country has understood this as well as Japan. Hardly any other country has taken such good strategic precautions. The third largest economy in the world experienced a turning point back in 2010.
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The reason for this was the well-known dispute with China over an uninhabited island group north of Taiwan, which today belongs to Japan and is claimed by China. At that time, China stopped exporting rare earths to Japan.
At that time, Japan was importing more than 90 percent of its rare earths, which are indispensable for the electronics and automotive industries, from China. Today it is only 60 percent.
“Supply chain risk was no longer theory. Our entire auto industry was on the verge of a standstill,” says former Secretary of State at Tokyo’s Meti Ministry of Economic Affairs, Tatsuya Terazawa, who many believe to be the inventor of today’s Japanese resource policy.
The consequences of the Chinese export ban still concern Terazawa today: “Many of our companies cannot live without China. But Japan cannot live without economic security.”
The concept of economic security, which the Japanese government is now operationalizing in the new Economic Security Act, has so far hardly played a role in the German discourse. With Putin’s war of aggression against Ukraine, however, its core content has moved to the forefront of the political agenda: the diversification of raw material sources, securing supply chains and the question of a new division of labor between the state and companies with regard to geopolitical risk management. Japan is a pioneer here.
The more important a raw material is and the more risky its country of origin, the more Japan supports companies in securing raw materials
Tokyo has built three main institutions:
- a raw materials agency (Jogmec) with over 600 employees, offices in 18 mining countries and an annual budget of the equivalent of more than twelve billion euros,
- a task force of the ruling party on economic security, which anchors the tasks of supply chain differentiation and circular economy in everyday party work,
- a new Ministerial Office for Economic Security, which centrally coordinates the work of all ministries on questions of economic security, including the procurement of raw materials and recycling.
Today, Japan understands its dependence on particularly critical raw materials as potentially threatening the very existence of society as a whole. Companies like Mitsubishi Electric have set up their own economic security departments.
Toyota invests very early in the value chain and is already active in mining, just as VW in Canada is only now planning to do. And the extremely powerful Japanese raw materials agency Jogmec provides support – from exploration and extraction to specifications for storage.
>> Read here: Powerco: VW wants to invest in raw material mines in Canada
In essence, the formula is: the rarer and more important the raw material and the more risky the country of origin, the greater the state support. As a result, Japanese companies are globally active in securing raw materials – along the entire value chain.
Germany, on the other hand, mostly buys in preliminary products that mainly come from Chinese sources. For this reason, Japan recently promoted its new economic security law at the Elmau G7 summit.
But how big is the problem of vulnerable commodity chains really? The answer: very large. And it’s still increasing.
Europe should be the first continent to become climate neutral, we owe that to our children and grandchildren. However, we need ever larger quantities of critical raw materials for this.
Projections by the International Energy Agency (IEA) show that in the future gas and oil will no longer make up the majority of energy-related trade goods worldwide, but rather critical raw materials.
Europe cannot continue to make its supply of raw materials dependent on geopolitical forces
Incidentally, it doesn’t take a conflict with China to realize that we need to reduce dependencies. In March, China decided to expand its renewable capacity by 450 gigawatts by 2030.
If China now uses its raw materials for its own energy transition instead of exporting them, or – as happened – throttles magnesium production for domestic political reasons, our energy transition would quickly falter.
We are missing what has been one of the most important goals of Japanese politics for years: sovereignty over raw materials.
The economically understandable withdrawal of German companies from the procurement and processing of raw materials has led to an immense market share for Chinese players. However, it would be criminal to leave Europe’s supply of raw materials to the geopolitical forces.
Based on a well-founded demand and availability monitoring, which the German raw materials agency Dera and the EU are already partially realizing, the state could accompany high-risk investments in raw materials such as rare earths and lithium and, where necessary, also provide financial support. In Japan, the state pays up to 75 percent of the costs.
Japan has already shown the way – with the invention of just-in-time production
The risks of mining are mostly of an ecological and social nature, such as groundwater contamination and child labour. But this is precisely where a strength of new European raw material projects could lie: in high ecological and social standards, in minimally invasive mining and in the use of secondary raw materials through the circular economy.
The current European attitude of relocating mining and the ecologically no less problematic processing of raw materials far from the gates of Europe must no longer be an option in the future. Otherwise the future of our energy transition and our industrial strength is in the hands of others.
At the beginning of the 1990s, many German entrepreneurs and politicians, especially from car-making regions, traveled to Japan. There they visited companies that had introduced new management strategies such as “just in time” production.
None of this could be transferred one-to-one to Germany. And yet many German companies have adopted the idea, which has contributed to enormous innovation and productivity boosts in this country.
Things could be similar on the way to German and European raw material sovereignty.
More: Lithium, copper, rare earths: Europe is gearing up for the global race for raw materials