Critical Raw Materials: Corporate Exposure, Supply Risks and Adaptation Strategies

However, there are currently significant supply risks, as extraction and processing are heavily concentrated in relatively few countries, among them China. These dependencies increase the vulnerability of global supply chains to geopolitical tensions and strategic interventions. With the Critical Raw Materials Act, European raw materials policy sets ambitious targets for expanding domestic extraction, processing and recycling. However, implementation is hampered by very limited production and processing capacities, lengthy approval procedures and economic obstacles. Even recycling can only make a limited contribution to security of supply. A representative survey conducted with the German Economic Institute’s IW Future Panel (IW-Zukunftspanel) shows that only 11 per cent of companies have a direct or indirect need of critical raw materials. In manufacturing firms, the figure is 18 per cent. Dependencies usually arise indirectly via supply chains and may therefore be underestimated. In the event of supply bottlenecks, companies expect rising costs, disrupted production and reduced competitiveness. Their predominant responses are diversification, stockpiling, substitution and recycling. In general, firms are willing to accept higher costs to ensure security of supply. If strategic dependencies are to be reduced, the private sector and the state will need to cooperate and coordinate their efforts.