Critical raw materials have moved from the margins of trade and environmental policy into the centre of industrial strategy, economic security and military planning. The European Union and the United States now recognise that access to minerals alone is insufficient. Strategic capacity depends on control over processing, refining, precursor production, recycling, logistics, finance and the downstream industries capable of sustaining demand. This paper examines the European Union’s emerging critical raw-materials regime and compares it with the increasingly interventionist American model. It argues that the EU has constructed a relatively comprehensive legal and regulatory framework, while the United States has developed a more concentrated system of financial inducements, defence procurement, development finance and trade-security instruments. The resulting transatlantic relationship combines cooperation against concentrated Chinese processing power with intensifying competition for projects, offtake agreements, investment capital and privileged access to resource-producing states.
The security of critical raw-material supply has become a structural condition for industrial power. Aerospace, defence, semiconductors, batteries, electricity networks, permanent magnets, data centres and advanced manufacturing depend on materials whose production and processing are geographically concentrated and whose markets are frequently opaque. The strategic problem therefore concerns the organisation of entire value chains rather than the physical scarcity of mineral deposits.
Europe enters this contest from a position of pronounced vulnerability. The EU produces meaningful shares of only a small number of extracted critical materials and remains overwhelmingly dependent on external processing for rare earths, magnesium, gallium, germanium, graphite and several other inputs. According to the European Parliament briefing on which this paper builds, 31 of the EU’s 34 designated critical raw materials have supply-risk indicators above the criticality threshold. China appears among the four largest producers of 18 extracted materials and 18 processed materials. In 2025, China supplied approximately 95.6 per cent of EU imports of processed rare earth elements, 94.5 per cent of processed strontium, 86.5 per cent of magnesium, 77.4 per cent of gallium, 75.9 per cent of germanium, 72.3 per cent of bismuth and 68.5 per cent of cobalt.
The United States faces a similar processing problem, although it possesses a larger domestic resource base and a federal government capable of concentrating fiscal, defence, trade and development-finance instruments. The White House reported that, as of 2024, the United States was completely net-import reliant for 12 critical minerals and at least 50 per cent import reliant for another 29. It also acknowledged that American rare-earth ores may still require foreign refining before being reimported as processed products.
The central distinction lies in policy execution. Europe’s Critical Raw Materials Act establishes quantitative targets, permitting deadlines, monitoring arrangements and strategic-project designations. The American system operates through production tax credits, Defense Production Act awards, federal loans, stockpiling, development finance, bilateral mineral agreements and the prospective use of trade restrictions or minimum import prices. Europe has developed a framework for governing dependence. The United States is constructing a mechanism for underwriting production and directing output.
The EU is therefore exposed to two connected pressures. Chinese processing concentration can suppress the commercial viability of alternative projects through low prices and market volatility. American subsidies and state-backed financing can draw globally mobile capital, technical expertise and future production towards US-linked supply chains. The issue is no longer whether Europe possesses a critical-minerals strategy. Its strategic position will depend on whether designated European projects obtain predictable revenues, financing and downstream customers before competing jurisdictions secure their output.
1. Critical materials as an infrastructure of power
The contemporary mineral problem differs from earlier commodity-security questions. Industrial economies previously treated most minerals as fungible inputs obtainable through diversified commercial markets. That assumption has weakened as production has become concentrated, processing technologies have grown more specialised and states have imposed export controls in response to geopolitical disputes. The value of a mineral deposit is now inseparable from the chemical separation, metallurgical processing, energy supply, intellectual property, transport infrastructure and manufacturing ecosystem surrounding it.
Processing is particularly consequential. Mining capacity can remain strategically subordinate when concentrates must be exported to another country for separation, purification or conversion into usable metals, powders, alloys, cathode materials or magnets. Both European and American policy documents now acknowledge that domestic extraction without downstream transformation provides only partial security. The April 2025 US Section 232 investigation consequently covered processed minerals and derivative products, including wafers, anodes, cathodes, magnets, motors, batteries, microprocessors and advanced optical systems.
This expansion of the security perimeter has significant implications. Governments are beginning to regard commercially unprofitable stages of mineral supply chains as strategic infrastructure. Public policy is consequently moving beyond geological surveys and mining permits into price stabilisation, guaranteed purchasing, equity participation, concessionary lending and restrictions on foreign ownership or market access. Mineral policy is gradually acquiring characteristics previously associated with defence procurement and energy security.
The geography of the problem also complicates conventional concepts of autonomy. Neither the EU nor the United States can reproduce every stage of every mineral chain domestically at reasonable cost. Security must therefore rest on a combination of domestic production, allied processing, diversified external supply, strategic inventories, recycling, substitution and the capacity to redirect trade during emergencies. Autonomy in this context is relational. It depends on the terms governing interdependence and on the ability to prevent a single external actor from exercising decisive leverage.
2. The structure of European vulnerability
The EU’s vulnerability begins with limited extraction. It accounts for approximately 48 per cent of global extracted strontium and 12 per cent of feldspar, yet only about 4 per cent of copper and around 2 per cent of fluorspar, nickel and tungsten. For most other extracted critical raw materials, the European share is below 2 per cent, and for 14 materials it is below 1 per cent. European processing capacity is somewhat stronger in hafnium, vanadium, copper and cobalt, though it remains insufficient across most strategically important chains.
Import dependence is especially acute for materials used in magnets, batteries, electronics and defence systems. The EU is fully import dependent for extracted heavy and light rare earth elements, antimony and boron, and more than 90 per cent dependent for graphite, tantalum and manganese. It is also fully dependent on imports of processed rare earths, beryllium, lithium, magnesium, niobium, phosphorus, scandium and titanium.
The problem concerns concentration as well as aggregate dependency. In 2025, a single supplier accounted for more than 60 per cent of EU imports of at least ten processed critical materials. China supplied 18 categories of processed materials to the Union and held a share above 60 per cent in eight of them. The EU’s extracted imports were more geographically diverse, although dependence on Türkiye for boron, antimony and feldspar, Guinea for bauxite and Japan for strontium remained pronounced.
European exposure is magnified by projected demand. The technologies considered strategic by the Joint Research Centre require extensive material inputs: space systems use around 30 designated materials, smartphones and laptops 27, data-transmission networks 25 and drones 24. Under the JRC high-demand scenario, EU requirements by 2050 could rise to more than 30 times the 2020 level for fluorspar, approximately 26 times for graphite, 21 times for lithium, 17 times for gallium and 16 times for nickel. These forecasts remain sensitive to technological change and substitution, yet their direction is clear. Industrial decarbonisation, digitalisation and defence rearmament are expanding demand faster than European supply capacity.
The decline in imports recorded between 2021 and 2025 should consequently not be interpreted as evidence of reduced strategic exposure. The briefing reports declines in imported quantities for most extracted materials, including falls of approximately 90 per cent for tungsten, 52 per cent for nickel and 37 per cent for manganese. Processed imports also declined for 20 materials. Given rising projected demand, these contractions are more consistent with supply constraints, export restrictions, price effects and industrial weakness than with successful European substitution.
The EU therefore faces a cumulative industrial risk. An interrupted supply of a relatively inexpensive processed material can immobilise production in downstream sectors whose economic and military value is much greater. The vulnerability cannot be measured solely through the euro value of mineral imports. It must be assessed through the production that would become unavailable if a highly concentrated input were withheld.
3. The European policy architecture
The Critical Raw Materials Act, in force since May 2024, provides the legal centre of the European response. By 2030, the Union aims to extract at least 10 per cent of its annual consumption of strategic raw materials, process 40 per cent and obtain 25 per cent through recycling. No single third country should provide more than 65 per cent of annual European consumption of a strategic material at any relevant stage of the value chain.
The Act also establishes shorter permitting periods. Strategic extraction projects are intended to receive decisions within 27 months, while processing and recycling projects are assigned a 15-month timeframe. Member States must establish single points of contact, participate in supply-chain monitoring, coordinate strategic stocks and impose risk-preparedness obligations on large companies operating in strategic sectors.
The Commission designated 47 strategic projects inside the EU and 13 in third countries during the first selection round. These include extraction, processing, recycling, substitution and integrated projects connected to batteries, permanent magnets, metallurgy and multiple-use materials. A second application round closed in January 2026 after receiving more than 160 submissions.
Designation, however, does not provide a project with sufficient capital, customers or protection from price volatility. This implementation gap led the Commission to introduce RESourceEU in December 2025. The plan envisages a European Critical Raw Materials Centre, a financing hub, coordinated stockpiling, demand aggregation, joint purchasing and mechanisms to facilitate long-term offtake. The Commission announced an intention to mobilise €3 billion in EU funds over twelve months and argued that accelerated projects could reduce dependence on individual countries by 30 to 50 per cent in selected battery, rare-earth and defence-related chains by 2029.
The financing structure combines several instruments. InvestEU is expected to mobilise around €2 billion in additional critical-material investments in 2026 and 2027. The Innovation Fund has allocated substantial resources to clean-technology manufacturing and material chains, while the Battery Booster is intended to support lithium, cobalt, nickel, manganese and graphite projects. The European Investment Bank has indicated that it can provide up to €2 billion annually for critical-material projects through loans, venture debt and private funds. The Commission has also discussed contracts for difference and other de-risking mechanisms to support long-term offtake.
The Raw Materials Mechanism began operating as a platform connecting buyers, suppliers, financial institutions and stockpiling providers. It covers the 17 strategic raw materials designated under the CRMA and is designed to aggregate demand, facilitate joint purchasing and assist projects in securing offtake agreements. Its first diversification round in 2026 concentrated on rare-earth, battery and defence-related materials.
These measures represent a significant development in European industrial policy. They also reveal the limitations of the original CRMA design. Quantitative benchmarks and accelerated permitting improve the conditions for investment, although they do not resolve the fundamental revenue problem confronting high-cost European mines and processing plants. A project competing against production supported by lower energy prices, state finance, existing infrastructure and strategic overcapacity requires predictable demand over a period long enough to recover its capital expenditure. Europe has only recently begun creating such market-support instruments.
4. The American model
The United States’ 2025 critical-minerals list contains 60 minerals, compared with 34 critical and 17 strategic materials under the EU framework. The American definition incorporates minerals judged important to national security and economic resilience and was expanded in 2025 to include copper, silicon, metallurgical coal, phosphate, potash, silver and several other materials.
American policy has developed through several overlapping institutional channels. The Department of Energy funds processing, recycling, extraction technologies and substitutes. In August 2025, DOE announced funding opportunities approaching $1 billion across mining, processing and manufacturing technologies, including programmes directed towards domestic processing and derivative battery manufacturing.
The Defense Department employs the Defense Production Act, direct procurement, stockpiling and the Office of Strategic Capital. Individual awards have supported tungsten, gallium, scandium, graphite, rare-earth separation and other defence-relevant chains. In 2025, the Office of Strategic Capital issued a $150 million loan to expand heavy rare-earth separation at the Mountain Pass facility. Legislation enacted that year provided $500 million in credit subsidy that could support up to $100 billion in loan capacity for critical minerals and related industries, although the eventual volume of deployed capital will depend on project quality and administrative execution.
The tax system supplies a further structural advantage. Section 45X provides a production credit for eligible components and applicable critical minerals produced in the United States. Unlike competitive grant programmes, a production tax credit can operate automatically when statutory conditions are met, allowing firms to incorporate expected support into project economics. Current IRS regulations require qualifying production or substantial transformation within the United States or its possessions.
The United States has also integrated critical materials into trade and national-security law. Executive Order 14241 of March 2025 defined mineral production broadly to include mining, processing, refining, smelting and derivative production, while the April 2025 Section 232 investigation examined whether imports of processed minerals and derivative products threatened national security. In January 2026, the administration directed negotiations with trading partners and retained the possibility of minimum import prices or other import adjustments.
Minimum-price arrangements have strategic importance because new non-Chinese projects are vulnerable to sudden price declines. A state-supported producer with large existing capacity can tolerate lower margins for longer than an emerging project carrying high financing costs. Import floors, contracts for difference or guaranteed procurement can insulate strategic production from such pressures. The American willingness to place trade-security measures alongside production incentives gives Washington a broader capacity to shape the domestic market into which new projects will sell.
External finance forms another pillar. The US International Development Finance Corporation closed a $600 million investment in a $1.8 billion critical-minerals consortium, signed a $565 million loan for a rare-earth project in Brazil, explored up to $700 million for a tungsten project in Kazakhstan and invested in a US–Ukraine reconstruction vehicle covering critical minerals and other strategic sectors. The consortium can use debt, equity, royalties, streaming and offtake instruments, allowing it to intervene across the project capital structure.
The American system is institutionally dispersed, yet its instruments can be assembled around specific projects. Tax credits improve operating economics; defence contracts create demand; DPA awards address technological bottlenecks; federal loans reduce capital costs; trade measures protect the domestic market; DFC finances foreign supply; and bilateral agreements seek to direct output towards American or allied buyers. This project-centred model is currently more developed than the EU’s system of strategic designation and coordinated guidance.
5. Europe and the United States as industrial competitors
The EU and the United States share an interest in reducing concentrated Chinese control over processing. They nevertheless compete within the same limited universe of commercially credible projects. Both require lithium, graphite, cobalt, nickel, manganese, copper, gallium, germanium, tungsten and rare-earth products. Both seek long-term contracts with Australia, Canada, Brazil, Kazakhstan, the Democratic Republic of the Congo, Ukraine and other resource-producing jurisdictions. Both need specialised engineers, processing technologies and investors capable of accepting long development periods.
This competition appears first in capital allocation. A mining or processing company deciding between European and American locations will compare energy costs, permitting risk, construction time, tax treatment, labour availability, customer proximity and public support. The EU offers regulatory predictability, a large industrial market and increasingly substantial public financing. The United States can combine tax credits, defence demand, concessional lending and political sponsorship within a single project package. Where project returns are marginal, the American combination may exert a stronger locational pull.
The second arena concerns offtake. Mineral projects are frequently financed against commitments from downstream customers. American defence contractors, battery producers and technology companies can enter contracts supported by federal incentives or procurement requirements. Europe’s industrial demand is large but institutionally fragmented across Member States and private companies. The Raw Materials Mechanism is intended to aggregate this demand, though its ability to conclude sufficiently long and bankable commitments remains to be demonstrated.
The third arena lies in third countries. The EU has established 15 strategic raw-material partnerships and identified a pipeline of approximately 60 relevant projects. Its approach combines trade agreements, Global Gateway infrastructure, sustainability requirements, regulatory cooperation and support for local value creation.
The United States increasingly relies on bilateral security frameworks and transaction-specific financing. Its arrangements with Australia, Japan, India, Thailand and other partners connect mineral supply to defence, advanced technology and strategic alignment. The October 2025 US–Australia framework committed the two governments to measures providing at least $1 billion of financing for projects in each country and explicitly connected mineral supply with industrial demand and stockpiling.
The EU concluded negotiations on a trade agreement with Australia in March 2026 that improves access to aluminium, lithium, manganese and other materials, removes or reduces tariffs and provides for cooperation and possible co-financing. The comparison is revealing. Europe’s principal instrument remains a broad trade and regulatory agreement. The American framework places financing, stockpiling and delivery to designated buyers closer to the centre of the arrangement.
Overlapping engagement is also visible in Kazakhstan and the Democratic Republic of the Congo. The EU has strategic partnerships and designated projects in these regions, while US development-finance institutions are considering large tungsten investments in Kazakhstan and have supported arrangements directing Congolese copper towards US and allied markets.
Resource-producing countries are unlikely to evaluate European and American proposals solely through geopolitical affiliation. Their governments increasingly seek domestic processing, infrastructure, employment, technology transfer and a larger share of value added. Financing speed and the credibility of long-term purchasing will therefore influence their choices. European sustainability standards can strengthen the legitimacy and durability of projects, but lengthy conditionality or uncertain disbursement can weaken their competitive effect. American offers can move rapidly and provide flexible capital, although an excessively transactional model may generate resistance when host states perceive that mineral security for Washington is taking precedence over local industrial development.
6. Divergent strategic strengths
Europe possesses several advantages that should not be understated. Its regulatory market is large enough to shape product standards and recycling requirements. European industry retains advanced capabilities in chemicals, metallurgy, automotive systems, machinery, aerospace and environmental technologies. The CRMA provides common benchmarks across 27 Member States, while the Raw Materials Mechanism can potentially aggregate a level of demand unavailable to most individual national governments. The EU also has extensive trade agreements and a diplomatic model that formally incorporates environmental protection, labour standards and domestic value creation.
Circularity constitutes a further European asset. The EU’s 25 per cent recycling target, requirements concerning permanent magnets and planned restrictions on the export of rare-earth magnet scrap could retain strategically valuable secondary materials within Europe. Existing recycling already supplies a meaningful proportion of European demand for antimony and smaller but relevant shares of tungsten, platinum-group metals, silicon and magnesium.
The United States holds different advantages. Federal institutions can treat mineral projects as matters of defence readiness and use authorities unavailable to the EU level. The dollar-based financial system, deeper venture and project-capital markets, large defence procurement budgets and federal tax powers provide multiple routes for state intervention. DFC’s expanded ability to use debt, equity, insurance and production-linked instruments gives Washington a comparatively flexible external investment platform.
The American government is also more willing to use market-access restrictions. The prospect of Section 232 measures, minimum import prices and domestic-content incentives can create a protected demand environment for new producers. This approach carries costs, including higher input prices and potential disputes with allies. It nevertheless addresses an issue that European policy has often avoided: strategically desirable production may remain commercially unviable under prevailing market prices.
Europe’s principal institutional weakness is fragmentation. Strategic projects depend on combinations of Commission programmes, EIB financing, national state aid, regional funds, private offtakers and Member-State permitting authorities. Each instrument can be substantial, but the project promoter must assemble them across different administrative systems. RESourceEU’s proposed financing hub and Critical Raw Materials Centre acknowledge this problem. Their strategic value will depend on whether they obtain authority to structure transactions rather than merely coordinate existing programmes.
7. The position of China
Transatlantic competition occurs within a system still shaped by Chinese scale. China’s position rests on several mutually reinforcing elements: large processing capacity, accumulated metallurgical knowledge, integrated downstream manufacturing, infrastructure, state-supported finance and a domestic market capable of absorbing output. Its leverage does not derive solely from ownership of mines. In several mineral chains, China imports ores and concentrates, performs the higher-value separation or refining stages, and supplies processed products or components to global industry.
The consequences are visible in both European and American assessments. The EU depends on China for dominant shares of processed rare earths, magnesium, gallium, germanium and other inputs. The United States acknowledges that domestic extraction does not provide security when ores must be exported for processing and permanent magnets remain imported.
Chinese export restrictions can produce immediate shortages, although sustained Chinese exports at low prices can also impede diversification. Alternative producers must invest during periods when market prices may not compensate for higher financing, energy, labour and environmental costs. Supply security therefore requires institutions capable of maintaining strategic capacity through price cycles. Temporary grants without long-term revenue protection will not be sufficient.
The EU and the United States consequently face a shared collective-action problem. Separate subsidy systems can expand non-Chinese capacity, yet uncoordinated competition can divide demand among too many projects, inflate asset prices and allow firms to extract concessions from allied governments. It may also result in duplicated upstream investment while leaving common processing or component bottlenecks unresolved.
8. Strategic implications for the European Union
8.1 Convert strategic designation into revenue security
European strategic projects require contracts that can support financing. The Raw Materials Mechanism should therefore be empowered to facilitate long-term pooled offtake involving automotive, energy, defence, aerospace and digital industries. EU programmes financing downstream production should give preference to diversified material inputs, creating a direct relationship between public support for batteries, magnets or defence equipment and demand for approved raw-material projects.
Contracts for difference should be introduced selectively for materials subject to concentrated production and severe price manipulation risks. The mechanism would compensate approved producers when market prices fall below a reference level and recover payments when prices rise above it. Such support should remain limited to projects meeting security, environmental and delivery requirements.
8.2 Establish a transactional European financing institution
The proposed Critical Raw Materials Centre should possess capabilities extending beyond market intelligence and coordination. It needs the capacity to combine debt, equity, guarantees, project-development funding, offtake and stockpiling commitments. DFC’s critical-minerals consortium demonstrates the strategic utility of an institution able to invest across the capital structure. Europe currently has sufficient aggregate financial resources, but project sponsors encounter a complex division between Commission grants, EIB lending, national funds and external-action instruments.
A dedicated European vehicle could assemble these resources around individual projects and negotiate on behalf of European industrial demand. Its performance should be evaluated through tonnes of diversified production delivered, processing capacity commissioned and concentration risk reduced rather than through nominal amounts announced.
8.3 Prioritise processing and intermediate products
European political debate frequently concentrates on opening mines. Extraction is necessary for selected materials, but processing represents the more general vulnerability. Europe should map bottlenecks at the level of oxides, salts, metals, powders, alloys, anodes, cathodes and permanent magnets. Public support should then focus on stages where a disruption would halt several downstream industries.
Integrated projects linking processing with European customers are likely to provide greater security than isolated extraction sites whose output can be purchased by foreign processors. Permitting and state-aid decisions should therefore evaluate the intended destination and transformation of production.
8.4 Use recycling as industrial supply rather than environmental policy alone
Europe’s stock of vehicles, electronics, batteries, turbines, industrial machinery and permanent magnets constitutes a strategic resource. Collection rates and material-recovery rates remain distinct: products may be collected without the critical materials being economically separated. Policy should support specialised metallurgical capacity, design requirements, traceability and restrictions on the export of high-value scrap where external sales would undermine European security.
Recycling will not eliminate the need for primary supply, particularly during periods of rapid demand growth. It can, however, reduce marginal import exposure and provide material during external disruptions. It also represents an area in which European regulation and engineering capabilities may produce a durable competitive advantage.
8.5 Manage competition with the United States
The EU should avoid a policy of unconditional alignment that directs European demand towards American-supported projects without reciprocal access. Transatlantic cooperation should be based on mutual recognition of qualifying materials, coordinated external financing, shared information on strategic stocks and arrangements preventing subsidy competition from fragmenting viable projects.
A division of labour may be more efficient than attempting to duplicate every supply-chain stage. The United States could contribute resource extraction, defence demand and large-scale project finance; Europe could provide specialised processing, recycling, chemical technologies, machinery and regulatory market access. Such cooperation requires enforceable provisions on offtake, emergency allocation and reciprocal treatment. Informal declarations of allied solidarity will offer limited protection during an actual shortage.
Conclusion
By mid-2026, the European Union and the United States had both abandoned the assumption that critical-material security could be left entirely to global commodity markets. Their strategies nonetheless reflect different political economies.
The EU has established the more explicit supranational framework. It has common lists, numerical targets, diversification thresholds, permitting deadlines, monitoring obligations, strategic-project procedures and an emerging mechanism for joint purchasing. Its policy incorporates circularity, sustainability and external partnerships within a single regulatory architecture.
The United States has assembled a more forceful project-delivery system. Tax credits, defence procurement, Defense Production Act funding, federal loans, development finance, stockpiling and trade-security measures can be combined to improve the commercial position of selected producers. Washington’s external policy is increasingly supported by transaction-specific finance and arrangements directing production towards American and allied buyers.
Europe’s strategic problem therefore extends beyond dependence on China. It must compete with the United States for capital, projects and future mineral output while preserving sufficient cooperation to prevent allied competition from reinforcing the position of the dominant processor. European policy will succeed when strategic designation produces operational mines, refineries, recycling plants and long-term supply contracts. Until that conversion occurs, the EU’s targets describe the intended structure of a future supply system rather than the material foundations of European industrial autonomy.
