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Economy

War’s impact on European industry grows

Europe seeks to source more raw materials from ‘like-minded’ countries

by Alex Scott
May 25, 2022 | A version of this story appeared in Volume 100, Issue 19

Government and industry officials in Europe say they are taking steps to avoid a repeat of the raw material shortages that have resulted from Russia’s invasion of Ukraine. The European Union relies heavily on the two countries for chemicals including fertilizers, lithium chemicals, and vanadium compounds.


Relying on Russia
The European Union wants to establish new suppliers for products that come heavily from Russia.
Table of chemicals imported from Russia.
Source: European Chemical Industry Council.

The European Commission (EC) is now reaching out to “like-minded” countries that have free trade agreements in place, including Argentina, Brazil, Chile, Peru, and several African countries, in a bid to secure additional supply of chemicals considered to be strategically important, said Hubert Gambs, deputy director general of the EC’s directorate for the internal European market and industry. He made the comments in a webcast hosted recently by the European Chemical Industry Council (Cefic), a trade association.

“Actions are being undertaken to boost the resilience of the European economy in strategic areas and to tackle these vulnerabilities,” Gambs said.

Additionally, the EC aims to increase domestic production of key chemicals that are vulnerable to supply chain problems. “Emphasis will be placed on the sustainable extraction and processing of raw materials in the European Union,” Gambs said. The EC’s third approach to supply chain security is to increase recycling of these chemicals, he said.

European manufacturers are increasingly concerned about their dependence on both Russia and China for certain materials. “China is really becoming a main supplier of a large number of critical materials,” said Elena Vyboldina, director of international trade and economy for Eurometaux, a non-ferrous metal industry association, during the webcast. To reduce dependence on China and Russia, Europe needs to promote mining and smelting capacity for critical metals, Vyboldina said.

Working together, the EC and Cefic have identified 137 chemicals with a “critical” level of supply chain vulnerability, Frans Stokman, executive director of petrochemicals for Cefic, said on the webcast.

The EC is especially keen to ensure supply security for rare earth elements used in sustainable energy products such as photovoltaic cells and wind turbines, Gambs said. The EC will make funding available to chemical companies to encourage them to expand production and recycling capacity, he said.

Gambs admitted it could take years to put such systems in place. In the near term, the EC needs to build additional storage capacity so the region can stockpile raw materials that are vulnerable to supply chain issues, Stokman said.

If anything, the outlook is getting worse, according to Gambs. “The global competition for raw materials and for access to raw materials is fierce,” he said.

Vyboldina also expects Europe’s supply chain travails to persist. “The issue is systemic. We can’t expect we can solve this problem completely,” she said.

Raw material price hikes and supply chain disruptions are affecting many companies across Europe. “Nothing is left of the anticipated upswing after the Corona winter,” says VCI, Germany’s largest chemical industry association. “The perspectives for our industry are getting ever bleaker due to rising energy and raw materials costs. Moreover, due to disrupted supply chains, our industrial customers are cutting back on production and ordering fewer chemicals.”

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