Mineral extraction: Germany’s dangerous lack of involvement

Germany is dependent on other countries to meet its demand for critical raw materials. In recent years, however, the number of investments by German investors in foreign mining companies has plummeted. This also applies to other EU member states. The IW Cologne is calling for action to be taken to reverse this trend.

For a long time, the vast majority of German companies relied on being able to procure the raw materials they needed at any time and in any quantity thanks to a functioning global market. “However, the Covid-19 pandemic, supply chain issues and growing international tensions have shown that this strategy is dangerous – and, above all, costly,” writes the German Economic Institute (IW Cologne). Furthermore, there is a high degree of dependence on China as a supplier of mineral raw materials such as rare earths and gallium.
The IW’s raw materials experts therefore argue that it is time to diversify and secure the supply of raw materials. One effective means of doing so is through shareholdings in foreign mining companies. However, developments in recent years have moved in the wrong direction, as shown in the chart. Between 2011 and 2020, the number of German stakes in foreign mining companies fell from 90 to 22. These are now spread across just four countries.
Although Germany has concluded raw materials partnerships with countries such as Kazakhstan, Chile and South Africa in recent years, these agreements must be more than mere declarations of intent in future. At EU level, it is important to ensure the swift conclusion of various ongoing trade agreements and to seek further raw materials partnerships.
In other European industrialised nations, too, holdings in foreign mining companies declined, albeit less sharply and from a significantly higher baseline, as the experts note. In France, they fell from 199 to 171 across eight different countries over the same period, whilst Italian companies held 72 stakes (previously: 100) in 17 countries in 2020. According to the IW, all EU countries lag far behind the major globally operating mining nations – the UK, Australia and China – in terms of shareholdings and turnover.
At EU level, it is therefore essential to ensure the swift conclusion of various ongoing trade agreements, to seek further partnerships in the raw materials sector, and to improve financing options for companies seeking overseas investments – for example, through a new Capital Markets Union.
Source: iwd