Study: Critical Raw Materials – From Dependency to Security

Europe and Austria are economically and geopolitically dependent on critical raw materials. This is a growing security risk. Bottlenecks in supply chains threaten supply and, with it, the competitiveness of the domestic economy. These are the findings of an analysis by the KONTEXT Institute and the Supply Chain Intelligence Institute Austria (ASCII). Circular economy measures offer the best way to free ourselves from this dependency, avoid becoming vulnerable to political blackmail and secure our competitiveness. 

Key Findings

Supply chain risk 

In the European Union, supply of 12 out of 17 strategic raw materials is at risk or at high risk. For eight of the 17 strategic raw materials, supply is considered to be at high risk. These include lithium (for batteries), rare earths (for permanent magnets in motors, wind turbines and electronics) and magnesium (for cars, packaging and construction).

Dependency on China 

For almost half of the raw materials (8 out of 17), China is Austria’s most important supplier and thus the country on which Austria is most dependent.

Export economy directly affected 

Austria’s export economy is directly affected: more than half of Austria’s annual exports (97 billion euros) require critical raw materials. The automotive, steel and mechanical engineering industries are particularly exposed, together exporting around 24 billion euros worth of products whose supply chains are at high risk. 

Reducing dependencies 

To reduce this dependency, the EU has so far pursued a strategy of diversifying supplier countries, promoting domestic mining and increasing the recycling of critical raw materials. However, diversification often fails due to a lack of alternative supply sources for many raw materials. Domestic mining does not solve the problem as long as downstream processing steps continue to take place outside Europe. Recycling is structurally limited, as the recycling rate for nine of the 17 strategic raw materials is close to zero, and processing capacities are often lacking in the EU. 

Policy measures are therefore needed that go beyond the supply side and make use of all the levers of the circular economy. The analysis identifies five key strategies with very high potential: 

1. Reducing demand for end products (e.g. energy efficiency measures, car sharing, expanding public transport) 
2. Increasing material efficiency (e.g. through lightweight construction and miniaturisation in the heavily affected automotive and steel industries, or binding ecodesign standards) 
3. Extending product lifespans (e.g. through right-to-repair, modular design or rental models) 
4. Reusing products and components (e.g. second-life use of EV batteries or modular steel structures) 
5. Recycling (e.g. batteries, electronic waste, construction waste, rare earths from permanent magnets) 

Policy measures needed to unlock potential 

The circular economy must be strengthened in the most affected sectors and across the economy as a whole. In addition to expanding recycling capacities, it is essential to introduce uniform product standards for material efficiency and circularity, corresponding criteria in public procurement, the implementation of the EU Energy Efficiency Directive and support for repairs. Ensuring security of supply therefore requires a paradigm shift at the political level. 

Conclusion 

Security of supply for critical raw materials can only be achieved for Europe and Austria if we use all the levers of the circular economy: from reducing demand to material efficiency and durability, all the way to reuse and recycling. With the right measures, we can safeguard our competitiveness, ecological transformation and digital sovereignty in an unstable geopolitical environment.