This young year is characterised by (in)security of supply. Companies in Europe should act now to avoid supply disruptions through targeted stockpiling of critical raw materials and to secure their production capacity.
Europe is particularly dependent on a few countries such as China for its strategic metal requirements. The geopolitical tensions of recent years have heightened awareness of the uncertainties of this one-sided supply situation. "These dependencies and risks will continue to increase," warns Matthias Rüth, Managing Director of TRADIUM GmbH. Strategic stockpiling of important resources such as Rare earths, Gallium or Germanium could be a major advantage in 2025 in order to hedge against supply risks and avoid production downtime.
Global role models: South Korea, Japan and the USA
A look beyond Europe's borders shows that other nations have already found good solutions to this problem. They rely on targeted storage strategies to minimise economic and geopolitical risks and make their industry more independent. These countries combine government measures with the support of private initiatives and thus offer practical models for the future:
- South Korea: With the "Industrial Supply Chain 3050 Strategy", the country is expanding public stocks and supporting private security reserves.
- Japan: The Japan Oil, Gas and Metals National Corporation (JOGMEC) has been coordinating the strategic storage of raw materials, such as rare earths, since the 1980s.
- USA: The National Defence Stockpile holds metals that are essential for national defence and civilian life.
- China: It is assumed that the The National Food and Strategic Reserves Administration stocks of all important raw materials - from agricultural products to technology metals such as germanium.
The EU has now also reacted: The Critical Raw Materials Act provides for better documentation of EU-wide stocks of critical raw materials. The first foundations for this are to be laid within 24 months. However, crucial questions regarding implementation still need to be resolved.
Companies: Better to act than wait and see
Until the EU-wide programme takes effect, it remains the responsibility of industry to take its own precautions. In Germany, the supply of raw materials is considered to be the responsibility of industry anyway, as the Federal Government in its current raw materials strategy emphasised. Nevertheless, practice shows that too few companies react. China's export restrictions for gallium and germanium in summer 2023 and the long processing time for issuing export licences meant that almost no metal shipments left China for over two months.
"Although a wake-up call could not be more urgent, only a few of the raw materials processing companies in Europe have increased their stocks," says Matthias Rüth.
Key figure-orientated companies usually only hold small strategic stocks of raw materials. This is understandable, but harbours considerable risks. Tax disadvantages and the high capital requirements for building up safety stocks make stockpiling difficult. The costs of stockpiling are a burden on liquidity, while the economic situation of many companies leaves little room for such investments. Nevertheless, companies should weigh up the alternatives: What seems like a financial challenge today can quickly be relativised in comparison to the consequences of a production standstill due to delivery failures.
