On September 3, the European Union updated its List of CRMs to include 30 raw materials with important economic and strategic value, including rare earths. The EU believes that these raw materials have significant economic value and contain supply risks, which are related to the EU's industrial layout and investment in research and development.

The Going Out Think Tank (CGGT) observed that China is the EU’s largest supplier of raw materials, providing 99% of EU light rare earth elements, 98% of heavy rare earth elements, 93% of magnesium, 69% of tungsten wire, and 66% of scandium. , 49% bismuth, 47% natural graphite, 45% titanium and other 10 key raw materials. In the four major directions of bauxite, lithium, titanium and strontium added to the EU's raw material list, the risks faced by Chinese investors have risen sharply.

How do Chinese companies respond to the EU's key raw material list? Today, the Go Global Think Tank (CGGT) published an article by Yuan Ruichen from the School of Shipping Economics and Management, Dalian Maritime University, for reference by corporate managers who are concerned about EU investment.

Point

1. The European Union believes that raw materials are the foundation of industrial development and involve various commodities and services in daily life and modern technology. Therefore, unimpeded raw material supply channels are essential to the EU economy.

2. The 2020 CRM list contains a total of 30 key raw materials, compared with 14 in 2011, 20 in 2014, and 27 in 2017, showing the EU's trend of expanding the concept of key raw materials.

3. Chinese-funded enterprises need to actively strengthen communication with various stakeholders, fully integrate into the EU EIT RawMaterials supply guarantee network, and obtain the EU and member states by combining long-term supply contracts with EU companies and high-quality fulfillment of social responsibilities. trust.

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CGGT, CHINA GOING GLOBAL THINKTANK

On September 3, 2020, the European Commission issued the "2020 Critical Raw Material (CRM) Newsletter", which contains the 2020 version of the key raw material list, and includes a total of 30 materials such as lithium and rare earths into the scope of protection. The newsletter also includes an initiative to establish an industrial alliance aimed at ensuring the sustainable supply of raw materials in EU countries.

In addition, the European Union also jointly released the "Strategic Technology and Industry's Key Raw Materials Report" to predict the material demand and supply risks of the EU's key technology sectors in 2030 and 2050.

1. Introduction to CRM and CRM List

The European Union believes that raw materials are the foundation of industrial development and involve various commodities and services in daily life and modern technology. Therefore, unimpeded raw material supply channels are essential to the EU economy. Specifically, the key raw materials have the following three characteristics:

One is to serve as a link between all sectors of the supply chain;

The second is as a support for modern technology;

The third is as an important driving force for clean technology.

The EU mainly refers to two types of parameters when determining the criticality of raw materials. The first is the economic importance of materials. It specifically examines the use range, strength and substitutability of a certain material in terms of final demand, and the added value it contributes to EU manufacturing. ; The second is the supply risk faced by this kind of material, which is calculated based on the import dependence of the material in the extraction and processing link (the EU believes that the supply risk in the substitution and recycling link is relatively low).

Therefore, as a priority action in the EU's 2008 "Raw Material Initiative", the EU has begun to publish a CRM list in its raw materials newsletter since 2011. In order to adapt to changes and innovations in production, market and technology, the EU will publish a version of the latest CRM list every three years.

2. The main content and features of the 2020 CRM communication

The 2020 CRM list contains a total of 30 key raw materials, compared with 14 in 2011, 20 in 2014, and 27 in 2017, showing the EU's trend of expanding the concept of key raw materials. In terms of the types of materials, 26 items in the 2017 list have been retained, and only helium (gas) has been removed from the list. The reason given by the European Commission is the decline in the economic importance of this material. However, due to the optimistic application prospects of helium in the new helium-like brain intelligence, battery energy storage and other digital economy fields, it is still possible to re-include the material in the next version of the list.

Four new materials, bauxite, lithium, titanium and strontium have been added to this year's list, which have high potential supply risks behind their important economic value. For example, 90% of the global bauxite output is used to produce metallic aluminum. The metal and its alloy products have excellent performance and low prices, and have been widely used in electronics, machinery, transportation, construction and packaging. At the same time, the EU's own bauxite production is extremely limited and highly dependent on imports from countries such as Guinea. The problem of titanium is similar to that of bauxite. Lithium and strontium are rare metals, especially lithium has a wide range of applications in lithium batteries, atomic energy, special alloys and other fields. It is known as the "21st Century Energy Metal". The EU is highly dependent on imports from Chile and Australia.

The supply risk of 26 reserved raw materials is still very high. For example, 98% of the EU's rare earth (REE) supply comes from China, 98% of the borate supply comes from Turkey, 71% of the platinum comes from South Africa, and the supply of rhenium and strontium is even directly dependent. With a company. At the same time, the European Union believes that the risk of centralized supply has increased due to lower raw material substitution and recycling rates.

The establishment of the "European Raw Material Alliance" is the biggest highlight in this year's newsletter. The EU will “establish an industrial alliance dedicated to ensuring the sustainable supply of raw materials in Europe”, and through the EIT RawMaterials consortium under the EU EIT (European Institute of Innovation and Technology), all stakeholders in the industrial strategic value chain (including the materials industry, Universities and research institutions) have gathered together to ensure the resilience of the rare earth and permanent magnet supply chain to support the EU’s automotive, aviation and energy sectors. In this process, EIT RawMaterials' six co-location centers (CLC) in Belgium, Finland, France, Italy, Poland and Sweden acted as regional innovation centers, fulfilling the function of linking industry, university and research. The EU will gradually expand the scope of the alliance's functions to other key raw materials in the future, and eventually include base metals to support the EU's circular economy projects.

In addition, the "Strategic Technology and Industry's Key Raw Materials Report" was released together with the "2020 Key Raw Materials Newsletter". Based on the EU’s 2050 climate neutral vision, it estimates such clean energy technologies (photovoltaics, wind energy, energy storage), Electric vehicles, digital technologies (ICT, AI, 3D printing) and other EU strategic areas have the prospects for key raw materials demand by 2030 and 2050, and point out the bottleneck of the EU supply chain. The report will provide important guidance for the EU and member states' governments to adjust their industrial and foreign investment policies in the future. Related market opportunities are worthy of Chinese investors' attention.

3. Impact on Chinese investors

Since the outbreak of the new crown epidemic, the EU and its member states have undergone major changes in the foreign investment review framework. The EU level has successively introduced the "Regulations on the Review of Foreign Direct Investment"; before the implementation of the regulations on international direct investment, the free flow of capital and the protection of EU strategic assets The "Guide to Member States" and the "White Paper on Creating a Level Competitive Environment in Foreign Subsidies", the new EU foreign investment review regulations will also be officially implemented in October. At the member state level, countries such as Germany, France, Italy, and Spain have all imposed strict temporary restrictions on foreign mergers and acquisitions in strategic industries. Key raw materials, as the focus of the relevant parties to strengthen the review, face higher investment risks and uncertainties.

For investors in the Chinese materials sector, the new EU investment regulatory environment has brought both challenges and opportunities. In terms of challenges, with the release of the list of key raw materials in 2020, as well as the EU’s demand forecast and supply warnings for raw materials in strategic technical fields in the future, EU member states will be more vigilant about Chinese capital in this field, especially in the newly added aluminum In the four major directions of earth minerals, lithium, titanium and strontium, the risks of Chinese investors’ failure to invest in Europe in the new three years are rising sharply. It is recommended that Chinese companies conduct in-depth research on the latest EU newsletters and reports on key raw materials, carefully assess the compliance risks of their own M&A transactions in accordance with the latest EU foreign investment review regulations, and adjust investment destinations and market entry methods in a timely manner.

At the same time, we can see that the EU is really worried about the continued supply of key raw materials. Traditionally, the European Union relied on imports from China in the field of rare metals, such as 94% magnesium, 90% antimony, 84% bismuth, and 62% cerium. Therefore, if Chinese companies make market-oriented direct investment in Europe, there is a high probability that they will still be welcomed by the EU. In this way, Chinese companies need to actively strengthen communication with various stakeholders, fully integrate into the EU’s EIT RawMaterials supply assurance network, and obtain the EU and member states’ approval by combining long-term supply contracts with EU companies and high-quality fulfillment of social responsibilities. trust. In particular, Chinese high-tech enterprises engaged in substitution (research and development of new materials) and recycling (recovering key raw materials from mining waste and landfill waste) will be supported by EU preferential policies. Companies can refer to the EU’s 2019 Report on the recycling of key raw materials and other raw materials from waste and garbage landfills" to obtain information on recycling prerequisites, technical procedures, recycling estimates, and practical cases. If the business of the above-mentioned enterprises is still connected with clean energy, electric vehicles and digital technology, it is recommended that Chinese-funded enterprises develop a vertical layout of the value chain in the EU to obtain scale benefits and information spillover brought by industrial agglomeration. Finally, Chinese companies should pay attention to retaining operating, financial and legal documents to prepare for submission in the EU interest test under the new-generation EU foreign investment supervision system to illustrate their positive role in the EU's construction of a sustainable key raw material value chain.

In the post-epidemic era, the regionalization of the global industrial chain supply chain will become an irreversible trend. From a global perspective, this is part of protectionism. However, industrial restructuring also objectively indicates that international direct investment will rebound rapidly. China's manufacturing industry has a lot of room for progress in key basic materials, and companies can focus on this wave of "going to sea" opportunities. In the long run, the domestic material industry going global will help my country improve the security of the industrial chain and supply chain, and promote the realization of a manufacturing power strategy.

東莞杰夫 三氧化二銻