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Securing Europe’s energy future: Addressing strategic dependencies in critical raw materials through ownership insights

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The energy transition requires vast quantities of critical raw materials (CRMs), many of which are mined and processed in countries that are geographically and politically distant from the European Union (EU). This article explores the ownership structures of companies involved in the extraction of these vital materials, an essential factor for assessing the EU’s strategic dependencies. It reveals that investors from outside the EU hold significant shares in global mining companies that produce CRMs such as cobalt, copper, lithium, nickel and rare earth elements. This underscores the urgent need for the EU to boost its strategic autonomy and develop a targeted strategy for securing these materials.

Geopolitical landscape and legislative framework

Recent legislation, notably the Critical Raw Materials Act of 2024, reflects the EU’s commitment to enhancing the security of its CRM supply chains and reducing dependence on non-EU sources. However, the production and processing of CRMs are heavily concentrated in a few countries far removed from the EU. For instance, the Democratic Republic of the Congo (DRC) produces 73% of the world’s cobalt, China mines 69% of rare earth elements, and Indonesia accounts for half of the global nickel supply (USGS 2023). This concentration creates a risk that these countries might leverage their dominant positions to serve broader strategic goals, thereby highlighting the need for the EU to fortify its raw material strategy.

Market structures and ownership concentration

The issue is further complicated by the concentration of firms controlling CRM supplies, leading to oligopolistic market structures (IRENA 2023). A small number of multinational corporations and state-owned enterprises dominate a substantial portion of global production. For instance, the top four mining companies control about 55% of cobalt production, and the top five companies hold 80% of the market share for lithium.

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While the geographical concentration of CRM resources is well documented, the ownership of companies involved in their extraction is less explored. Yet understanding who controls these companies is crucial for assessing strategic dependencies. Building on Leruth et al. (2022), a comprehensive database has been developed to document the origins of shareholders in global companies involved in mining cobalt, copper, lithium, nickel, and rare earth elements (Faubert et al. 2024).

Findings and ownership patterns

The database uses various indicators to map the geographical origin of capital owners, including production and market capitalization-weighted holding rates, alongside measures of majority ownership. These indicators reveal that non-European investors hold a significant share of the capital in listed CRM mining companies.

For example, Chinese investors have a dominant presence in the extraction of rare earths, cobalt, and, to a lesser extent, lithium. European investors, by contrast, have relatively limited stakes in these industries. However, the EU’s notable involvement in the nickel sector largely reflects Russian interests represented through investments in Cyprus. Besides China, US investors also have substantial holdings, particularly in the lithium and copper sectors. Although Latin American investors possess significant capital in firms producing lithium and copper, their investment levels do not correspond with the region’s share of global production. Australian investors have a surprisingly limited presence in the lithium sector, despite the country’s significant lithium reserves, with two of the largest Australian lithium mines being owned by Chinese companies.

Implications and strategic considerations

This database provides a detailed overview of the ownership interests in listed CRM companies, offering valuable insights against the backdrop of rising geopolitical tensions. While the CRM Act aims to mitigate strategic dependencies by diversifying the EU’s supply sources, it does not adequately address the vulnerabilities associated with concentrated ownership of mining capital. The Act’s focus on diversification targets at the country level overlooks the risks linked to concentrated capital ownership. Therefore, assessing the concentration of capital in the mining sector through ownership data presents a different perspective compared to merely considering geographical locations of mines. This information could prove crucial for identifying vulnerabilities and refining diversification targets.

Furthermore, the CRM Act seeks to enhance the EU’s capabilities in the extraction, processing, and recycling of CRMs. Developing a robust European mining industry will require significant private investment (Hache and Normand 2024). Given the EU’s goal of strengthening its economic security, understanding the sources of control over European mining companies is essential for assessing supply and geopolitical risks within the EU. Our findings underscore the need for greater transparency in the ownership of new mining projects within the EU.

Conclusion

Overall, our analysis highlights the necessity for the EU to enhance its strategic autonomy and develop a metal-specific strategy. The database we’ve developed could be a key tool in guiding investment decisions for European entities looking to increase their stakes in major CRM firms. As the energy transition progresses, securing a stable and autonomous supply of critical raw materials will be vital for the EU’s economic and strategic resilience.

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