The European Union is to pitch a draft pact on critical minerals to the US Trump administration. The goal is simple. Europe and America want to break China’s lock on the metals that help power everything from electric cars to missile guidance systems.
The offer would bind the two economic giants into a three-month sprint to design a ‘Strategic Partnership Roadmap‘. The plan sketches joint mining ventures, price-support tools and an understanding that each side will exempt the other from export curbs. Officials also propose a firewall against market manipulation, a nod to Beijing’s habit of flooding the market when rivals threaten its supremacy. Both capitals hope to finish the negotiations within 30 days.
They are hurrying. China still refines roughly three-quarters of the world’s lithium and rare earths. Beijing’s export limits, eased last October after a truce with Washington, could snap back at any moment. That risk convinced the European Union it could no longer argue over turf while Washington courted individual member states.
Digging in together
Brussels has practical reasons to court Mr Trump. Last month the White House launched a $12bn stockpile to buffer American manufacturers against supply shocks. Europe, by contrast, is only now drafting legislation to pool buying power. Many capitals fret that the US will hoover up global output first, leaving European factories as collateral damage. Stéphane Séjourné, the EU’s executive vice-president for industrial strategy, put it bluntly last November: America “often buys them from under our noses”.
The new transatlantic offer tries to narrow that gap. It floats joint reserves, research programmes and a response group that would swing into action if Beijing again squeezed exports. It even contains a diplomatic olive branch in the wake of Mr Trump’s flirtation with buying Greenland, insisting that both parties “respect each other’s territorial integrity”.
You might be interested
Europe’s outreach reflects a wider rethink. Since April Chinese controls have forced a number of EU plants to idle. The Commission now wants a central purchasing agency able to coordinate stockpiles and offer price floors that encourage mining at home. Yet European permitting moves at a crawl. That leaves alliances abroad—and with Washington—as Brussels’ fastest route to security.
Setting the price of power
Washington has its own wish list. It wants partners to endorse price floors and border-adjusted levies that blunt Chinese under-cutting. A draft communiqué eyes “coordinated trade policies and mechanisms, such as border-adjusted price floors, standards-based markets, price gap subsidies, or offtake agreements”. Some European capitals bristle at anything that smells like industrial planning. The Commission, however, sees a chance to leverage America’s clout while keeping the club together.
The substitution myth may be a dangerous illusion. — Randall Atkins, CEO of Ramaco Resources
Both sides also back stockpiling. Brussels’ memo notes that shared reserves could smooth shocks. That dovetails with Mr Trump’s new hoard, which promises to buy when prices sag and sell when they soar. Together, the two stockpiles could underwrite fresh projects outside China.
Those projects need help. Extracting and refining rare earths is costly and messy, which is why Western output withered decades ago. Now miners and magnet makers scramble for cash. As Jonathan Rowntree, chief executive of Niron Magnetics, told Congress in November, “We’re scaling technology as quickly as possible to reach a 10,000-ton capacity of iron nitride, where we can really move the needle on magnet supply.”
Money, mines, magnets
Financing remains thorny. François Motte, chief financial officer of Chile-based Aclara Resources, laid out the dilemma in Global Finance: “Until a market is created outside of China, we’ll have to rely on government financing.” His firm has secured American loans for a Brazilian venture but still frets about a double-digit cost of capital.
Washington has gone further. MP Materials won a decade-long Pentagon guarantee that props up neodymium-praseodymium prices at $110 a kilo. The arrangement pays the company when prices dip and claws back gains when they rise. Europe, wary of subsidies, has no comparable scheme. The proposed deal could change that by letting Brussels shelter its own miners under an American umbrella.
Some policymakers pin hopes on substitutes. Yet Randall Atkins, chief executive of Ramaco Resources, offered a tart reminder to Financial Times: “The substitution myth may be a dangerous illusion.” Iron-nitride magnets excite engineers but still limp under heavy loads. Exotic alloys such as tetrataenite sparkle in labs yet remain hard to scale. Even the most bullish researchers admit replacements will cover only slices of demand.
That leaves efficiency. Firms such as ABB and Noveon Magnetics are “thrifting”—concentrating rare earths at the grain boundaries of magnets and trimming usage by up to 70 per cent. The trick is pricey now, though costs may fall. Recycling, another plank of Europe’s strategy, suffers from low recovery rates. A new French plant will combine refining with magnet salvage, but only modest volumes are expected this decade.
Tricky permits
Permitting may be the toughest obstacle. In America new mines can take a decade to clear red tape. In the European Union activists and local councils wield even more veto points. Developers plead for deadlines on appeals. Without them, private capital will stay shy.
Here the draft transatlantic pact could help. A common rulebook and shared risk data would speed decisions. Joint funding for cleaner extraction techniques could dampen local opposition. A promise to shield each other from export bans would reassure investors that politics will not strand their projects.
Until a market is created outside of China, we’ll have to rely on government financing. — François Motte, CFO of Aclara Resources
Much could still derail the talks. Some EU states see any sign of protectionism as heresy. Mr Trump’s negotiators may chafe at clauses that dilute American leverage. China, wielding a deep discount, could tempt swing suppliers to stay out of the Western camp.
Yet the need is pressing. Defence contractors count weeks of rare-earth stock. Carmakers plan multibillion-euro battery plants that hinge on steady lithium flows. Without more secure supply, Europe’s green agenda and America’s industrial renaissance could both stall.
Hard bargaining ahead
For now optimism trumps caution. Officials on both sides claim the memorandum is 80 per cent done. If they seal the pact by early spring, they will launch detailed talks on production grants, offtake deals and crisis controls. The hardest bargaining lies ahead—over who pays for what, and who reaps the gains—but alignment on broad principles marks a shift.
China will still dominate mining and refining for years. No realistic plan can sever that dependence soon. What Europe and America can do, however, is build an insurance policy: redundant mines, mothballed stockpiles and a standing committee that watches prices like hawks. The forthcoming partnership could become that policy’s backbone.
If successful, the scheme would mark the first big industrial accord of Mr Trump’s second term and a rare proof that Brussels can move quickly when its back is to the wall. Should it falter, China’s grip will tighten and Western promises of supply-chain resilience will ring hollow.
