A huge deposit of rare earths has been found in Sweden. Politicians and the media are celebrating the find as a sensation that might make Europe independent of China.
98 percent of all rare earths processed by Europe are imported from China. However, many experts doubt that the find will quickly play such a major role as previously reported.
“It will be another 35 years before rare earths from Sweden are installed in electric cars,” said an expert in an interview with Business Insider.
Politicians and the media celebrated the discovery of rare earths in Sweden as a sensation – as an important step towards independence from Chinese dictator Xi Jinping. Yes, is that right?
One of the largest deposits of rare earths in Europe was discovered in Kiruna, Sweden’s northernmost city. More than a million tons of rare earth oxides are buried here.
The special metals are used primarily for the production of smartphones, laptops and electric cars. The amount that has now been found in Sweden would be sufficient, according to initial information, to satisfy large parts of EU demand.
To date, Europe has imported rare earths almost exclusively from China, which dominate the world market. According to a Commission report from 2020, the EU covers around 98 percent of its requirement for rare earths with deliveries from China.
Is Europe now making itself independent of a dictator?
Harald Elsner is an economic geologist at the Federal Institute for Geosciences and Natural Resources and an expert in the field of rare earths. He says the find is “not of great importance” in Sweden – the amount is too small. “There are many deposits, at least two dozen worldwide, that host a million tons or more of rare earths,” Elsner told Business Insider.
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In addition, a system would have to be set up and adjusted. Even if work were done quickly, it would take at least decades for this raw material to reach the international market. Elsner’s conclusion: “It will be another 35 years before rare earths from Sweden are installed in electric cars.” It is therefore “completely impossible” for the German economy to benefit from them. “The deposits found do not change Germany’s dependence on China.”
Commodity expert takes a critical look at the find
Commodity expert Urs Gmür, who manages the Rare Earth Elements fund, is similarly critical. Large finds are often “media hooks,” says Gmür to Business Insider. “I don’t want to be cynical, but just because large deposits are suspected or, as in the case of Sweden, discovered, does not mean that such projects can also be realized.”
The hurdles on the part of ESG are still far too great. ESG refers to the consideration of environmental, social and responsible corporate governance criteria. “Societal acceptance of the “mining business” still does not exist on our continent,” says Gmür. “We Europeans don’t mind sourcing ‘critical raw materials’ from areas where ESG guidelines are only poorly applied, but when it comes to extracting deposits on our continent, things are slowed down,” criticizes the raw materials Expert.
Armin Sabeur, CEO and portfolio manager at the Optinova fund boutique, which specializes in commodity investments, also believes that the fund will have little impact on the economy. “Companies buy where they can get it now. And right now they’re getting it from China.”
But the find is not without consequences either: the Swedish raw material might have an impact on geopolitical relations. “With this find, Europe can now act more confidently towards China and not have to duck in the negotiations,” Sabeur told Business Insider.
“This reduces China’s market power in the field of rare earths”
Thomas Altmann is much more optimistic regarding Europe’s dependence on China. He is Head of Portfolio Management and Commodity Expert at investment firm QC Partners. For him, the discovery of rare earths is “excellent news”.
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With Sweden, another funding country has now been added. “This greatly reduces China’s market power in the rare earth sector,” Altmann told Business Insider. During Donald Trump’s presidency, China openly threatened the US with stopping exports of rare earths. “Such threats may be less scary in the future.”
According to Altmann, it can be assumed that German companies will try to diversify their supply chains in order to become more independent of Xi Jinping. “The German economy will certainly do everything in its power to avoid a similar dependence on rare earths as on Russian oil”.
This article was published on January 13, 2023 and was updated on January 14, 2023.
