we have increasing import dependencies from China and this is putting a heavy burden on companies all across the globe it needs to be dealt with as well on the highest political level china almost has a monopoly on the processing of critical raw materials what Europe urgently needs to do is to really ramp up the resilience of its global supply chains germany and the US are each in urgent talks with China over the squeeze on so-called rare earth mineral exports which is threatening to bring some industrial production in those countries as well as others to a standstill stefan Steinica with the Federation of German Industries also known as BDI joins me now for more stefan thanks for joining us we want to get into the details in just a moment but maybe you can help us understand upfront just how urgent this current situation is for German businesses thanks for having me well for German business this situation is quite challenging to put it bluntly the time window for avoiding significant damage in German industry is rapidly closing all right let’s go into this further what are these minerals and why are they so important for those for viewers who may not understand so rare earth elements are highly important for our digital transformation think about semiconductors they are important for our green transition think about um energy and they are also important for defense purposes and today China is not only the largest producer of rare earth elements but also of rare earth magnets 93% of all magnets globally produced are coming from China so we have increasing import dependencies from China and the moment that China now introduced these new export control measures exports from China reduced significantly and this is putting a heavy burden on companies all across the globe but also across Germany all right so you mentioned there climate industry climate manufacturing the auto industry even defense reliant on these minerals and the magnets that are uh that they help comprise um are there alternatives to these minerals today on an industrial scale there are no alternatives to these materials and that’s why it is so important to have serious discussions between the European Commission and Chinese counterparts on how to limit the damage that has already been done and how this situation can be eased stefan help us understand what exactly is happening you’ve already referenced these export restrictions from China is this a formal ban or is it a sort of a slow process how should we look at this and understand it so in order to understand it I think it is important to to keep in mind why this happened in the first place it seems that it was a direct reaction from China on um the announcements made by US President Trump on so-called liberation day so China right after the announcements from President Trump announced the installation of a new export licensing system without any warning time for for European companies for European governments it in in instructed this new export licensing system immediately and this resulted in the following situation no more rare earth elements and products incorporating these elements like the magnets were allowed to leave China in order to make sure that this new licensing system can be put in place in the first place what we now see is that we have a huge amount of new licenses that have been applied to but it seems that um the Chinese authorities are not able to keep up with the huge amount of licenses that have been applied to so we have a backlog in in the Chinese um in the Chinese ports and this immediately affects global supply chains what we see if we look at Germany there are some companies that are already almost running out of reserves of their metals and materials there are others that have already been running out of their of their um materials so we see a reduction of produ reduction of production in in first cases and this time window to avoid further damage is rapidly closing if not a solution is be found in the next couple of days we will see additional uh production reductions i want to come back to that in just a moment but first of all when we look at the origin of this problem you mentioned that it appears to be political and trade related coming as a response or directly after those reciprocal tariffs from the US were announced do we have an understanding of whether any solution is going to be mostly political with China or is there some way to have them speed up the process is there also a kind of uh bureaucratic solution to it or is this going to be primarily political i think it is both if China wants to it could easily offer a Europeanwide license for companies that apply to export these uh materials to Europe but obviously um it is also a political question and therefore it needs to be dealt with as well on the highest political level it has to be dealt with immediately for German companies not to remain in the crosshairs of global trade and geopolitical power conflicts this will most likely not be an easy political solution since Europe also faces pressure from the US to control exports going to China is that the situation we’re looking at is that this is a very sticky um messy three-way kind of uh discussion about trade and politics and the position of Europe towards China yeah I think you’re absolutely right it is a it is a huge challenge it’s a challenge that won’t be solved easily we have the US we have China we have Europe we have an increasing geopoliticization of global trade in general and of global raw material supply chains in particular and this is a challenge that won’t be a easy be so easily be solved and b go away um and in this kind of situation what Europe urgently needs to do is to um to really ramp up the resilience of its global supply chains stefan who is stopping production right now when we look at German industry and how bad is it going to get so the the sectors mostly effective are automotive the energy sector machinery defense um medical productions um and these are the sectors that are already today um signaling that they are running low on inventory and are anticipating further production reductions are there is there a kind of timeline in terms of the amount of stock in these materials that we already have in Europe for example um when do those look like they could run out or reach a critical level for companies so this is really um confidential information by the companies that is not uh that is not shared um but as I said the window to to to solve this issue is rapidly closing and from a German industry perspective the question of reliability of trade partners is of increasing concern and in case of in the case that no solution is to be found in the next couple of days the German industry needs to really think about um readjusting its global supply chains and look for other more reliable able trade partners with regard to critical raw materials when we talk about these raw materials is it just that China has the cheapest uh they obviously have the most but they also just have the cheapest is it not possible to find other solutions they’re going to be more expensive and obviously that will carry its own consequences yeah so China um holds a vast amount of reserves of certain critical raw materials but definitely not of all raw materials but China almost has a monopoly on the processing of critical raw materials but this at the same time gives us in Europe and in other parts of the world also a huge lever of um reducing import dependencies from China namely by um ramping up um processing production facilities also in Europe and to put it bluntly raw materials made in Europe are the ultimate reinsurance policy against geopolitically motivated export stops alternatively could we see more German companies try and produce in China and then export finished products out of that country yeah these these are discussions that are um taking place not only in Germany but also in the US as I um saw yesterday at the end of the day it is always a question of how and where you position yourself in global value and supply chains um it might be one part of the answer of relocating certain parts um closer to to where the raw materials are processed but but as I said the ultimate reinsurance policy and the most resilient supply chains are those that start with the critical raw materials production here in Germany or in Europe and we have some capability here to do this on on our soil too we know the EU has been talking about this for years that it passed the EU critical raws raw materials act rather uh several years ago and that one of its goals is for 2030 that no more than 65% of EU consumption of these materials should come from a single third country is that timeline realistic this timeline is um is is a rather optimistic one and it’s a challenging one to to reach these targets but I think these targets are a good way to start and give us a north star of where we want to head to um it is a first step and it is good that the first strategic projects in Europe have been um have been decided upon and now it’s up to us to really bring these additional sources online in order to enhance our own security of supply all right uh that’s Stefan Steinica with the Federation of German Industries stefan thank you so much