The European Commission is extending its analysis of strategic dependencies to rare earths, magnesium and chemicals, but also to the photovoltaic and cyber security sectors, with the publication of its second Strategic Dependencies Analysis Report on Wednesday 23 February. However, significant progress has been made in the 6 areas identified in the first report.
For example, with regard to rare earths, magnesium or photovoltaic panels, the report notes that global production is concentrated in China, with little room for diversification within the European Union.
For example, in the field of magnesium, China controls 89% of world production. However, in 2021, geopolitical tensions in the Pacific led to coal shortages in China, creating an energy crisis, forcing the Chinese regime to temporarily shut down 25 magnesium plants to reduce energy consumption, the report says.
This has created a major disruption in the global supply chain and ultimately a substantial increase in global magnesium prices with an increase of over 400% in September-October 2021, causing a crisis in the European industry.
The European Union also suffers from many dependencies in the chemical sector. The report focuses on 61 products identified in relation to the industrial strategy. Again, China accounts for a large proportion of the chemicals, along with the US, Switzerland, India and the UK.
Strategic dependencies also exist in the areas of services and technology. Some in-depth reviews (cyber security, computer software) highlight the risks of the EU’s dependence on access to critical technologies in these areas, especially vis-à-vis the US and China.
However, it is not all doom and gloom. The report takes a positive view of the progress made since the publication of the first report following the update of the industrial strategy in 2021 and the six identified areas covered (raw materials, active pharmaceutical ingredients, li-ion batteries, clean hydrogen, semiconductors and cloud services) (EUROPE 12713/6).
International partnerships (e.g. with Canada, Ukraine or Serbia - see EUROPE 12745/18) have been initiated to diversify and strengthen the EU’s supply chains. Alliances (see other news with the Battery Alliance) have been launched as well as important projects of common European interest, such as for semiconductors (see EUROPE 12886/1).
For the full report: https://aeur.eu/f/gx (Pascal Hansens)