Europe must break China’s grip on rare earths pricing to spur investment, sector body says

(Refiles to correct EIT Raw Materials to EIT RawMaterials in paragraph 4)

By Julia Payne and Philip Blenkinsop

BRUSSELS, May 20 (Reuters) – Europe must build its own pricing system for ‌specialty metals and rare earths to reduce reliance on China and unlock investment in ‌mining and processing, industry expert Bernd Schaefer of the EIT told Reuters on Wednesday.

China dominates critical mineral supply chains and ​sets prices through opaque domestic markets, leaving Western developers without clear benchmarks, complicating investment decisions and delaying already higher-cost projects in Europe.

The EU has a target to mine at least 10% of its annual requirements of strategic raw materials by 2030 and rely on a single third country for no more than ‌65% of its annual needs.

EIT RawMaterials, ⁠an agency partly funded by the EU, is collaborating with digital platform Metalshub, it said last month, to create a European index to foster innovation ⁠in new minerals mining, refining and recycling projects in the bloc.

Schaefer said it would, however, take time to create an index with representative prices. The index would aim to provide transparent, market-based price benchmarks for critical ​minerals ​traded outside China, giving investors clearer signals on profitability ​and helping underpin financing for new projects.

“My ‌understanding is that this would require trading a volume of a minimum 10% of the traded volume (non-China)…depending on the raw materials,” Schaefer said. “What we are getting from China is neither representative nor, in strict microeconomic terms, a price,” Schaefer said.

Schaefer said an index could be broader than just Europe, with collaboration from other traders, such as in the United States, Australia, Canada or Britain.

It was difficult ‌to say whether the EU would meet its critical ​mineral diversification goals due to a lack of transparent data ​on volumes and growth expectations, he said.

The ​EU announced its 3 billion euro RESourceEU action plan in December to speed ‌up diversification of the bloc’s supply chains ​and reduce its overreliance ​on China.

Concrete action has been slow with the exception of a pilot joint EU stockpile led by Italy, France and Germany. The countries have shortlisted metals including tungsten and gallium ​as the first to go into ‌storage.

Without building domestic processing and transparent pricing, Europe risks remaining dependent on Chinese benchmarks — ​and seeing any new raw material output flow straight back into China’s supply chain, ​Schaefer said.

(Reporting by Julia Payne;Editing by Elaine Hardcastle)