Ensuring a secure and sustainable supply of Critical Raw Minerals

Unsurprisingly, the main target of the CRMA is to maintain and establish a secure and sustainable supply of Critical Raw Materials to the EU. The term Critical Raw Material is defined through two annexes. They list 34 materials which are considered strategic, 17 of which are considered critical. The Act considers the high concentration of these materials within few third countries as a potential risk to their supply. The short period between the EU Commission's proposal in March 2024 and the final adoption of the Act in April 2024 shows how serious the EU's institutions and Member States are taking this risk. The CRMA expresses the recognition of the dependence on the supply with Critical Raw Materials for the European internal market and economies and references possible sources of these Critical Raw Materials, including deep seabed mining in its Recitals. 
The Act takes a three-fold approach to minimizing the risks related to the supply of Critical Raw Materials. 

First, the EU advertises and incentivizes the extraction of raw materials in the territories of EU Member States. It envisions a quota of 10% of all critical raw materials consumed in the EU to be produced in the EU. Therefore, new exploration projects, including in Kiruna in northern Sweden, will receive increased attention and potentially more accessible extraction conditions. 

Second, the Act calls for a significant increase in recycling efforts, totaling up to 25 % of annual consumption in the EU. Waste landfills in Europe are expected to comprise large quantities of critical raw materials that could turn into lucrative mines. Likewise, the EU still exports significant amounts of waste that comprises the direly needed materials. Therefore, Member States are held to devise measures to increase the circularity of their economies. 

Third, the EU sets the target of reducing dependency for any critical raw material on a single non-EU country to less than 65 % by 2030. This objective specifically targets Chinese supply and control of rare earths, which are currently almost exclusively sourced and refined in China. In line with this target, the EU is already establishing strategic partnerships and fostering raw mineral partnerships that will lead to increased investment and simplified import conditions for these materials.

Opportunities for the private sector

The CRMA primarily addresses the public sector, the EU Commission and Member States to address insecurities in the supply of raw materials. However, the Act recognizes the importance of the private sector at every step of the process. The CRMA therefore offers significant opportunities for companies, but also creates new obligations that companies must adapt to quickly. 

A key element in securing raw material supply chain security is the promotion of strategic projects. Strategic projects can be located in both EU Member States and third countries and can be undertaken by both governments and the private sector. The EU Commission is responsible for this qualification and will evaluate applications based on a set of criteria, including the feasibility of a project, its sustainability and reliability. Qualifying a raw material-related project as a strategic project has multiple benefits. The Act provides for improved access to finance opportunities and access to de-risking mechanisms for investments. 

Moreover, the Act recommends financial support for strategic projects through already established EU funds, including the Just Transition Fund, the European Regional Development, the Recovery and Resilience Facility, the Innovation Fund, and InvestEU. With regard to assistance through individual Member States, the Act's recital states: 

Where private investment alone is not sufficient, the effective roll-out of projects along the critical raw material value chain may require public support, for example in the form of guarantees, loans or equity and quasi-equity investments. That public support may constitute State aid.

Departing from established antitrust law, state aid may therefore be permissible if it is used to ensure stable raw material supply chains. 

In addition to financial assistance and improved access to finance, strategic projects may benefit from simplified approval procedures. The Act proposes that project promoters of critical raw material projects shall only have to interact with a single point of contact on the government level. Complex and lengthy approval procedures have been one of the main concerns of many companies operating in the sector. 

Obligations for the private sector

The scope of obligations for the private sector under the Act is generally limited and it emphasizes several times that it is upon states to ensure the security of their supply chains. For example, the recital affirms that companies are not under the obligation to stockpile raw materials for the case of supply chain disruptions. 

However, Art. 24 CRMA explicitly deals with "company risk preparedness". By 24 May 2025 and within 12 months of each update of the list of strategic raw materials, Member States shall identify the large companies operating in their territory that use strategic raw materials to manufacture batteries for energy storage and e-mobility, equipment related to hydrogen production and utilisation, equipment related to renewable energy generation, aircrafts, traction motors, heat pumps, equipment related to data transmission and storage, mobile electronic devices, equipment related to additive manufacturing, equipment related to robotics, drones, rocket launchers, satellites or advanced chips. Once this list is drawn up and conveyed to the EU Commission, these companies will be required to carry out risk assessments at least every three years. This includes a mapping of their supply chains, analyzing potential fallout risks, and assessing their vulnerability in the event of a disruption. If they identify significant risks, they are obliged to mitigate these, including by diversifying raw material sources. 

This risk management obligation therefore adds to the growing number of reporting and risk management obligations that companies face under EU law. We have already updated you on the Corporate Sustainability Due Diligence Directive (CS3D) and the Corporate Sustainability Reporting Directive (CSRD), both of which require enhanced assessment of supply chains from a human rights and environmental risks perspective. Companies must therefore comprehensively assess their supply chains and determine whether they are sustainable in the sense of the CSRD and CS3D and secure in the sense of the CRMA. This process requires a certain level of diligence. Attention on these matters is set to grow over the coming years. 

The way ahead

Companies that procure or process raw materials that are deemed critical - which includes almost all companies in the manufacturing sector, chemical industry, and heavy industry - have to prepare for more turbulent times. The steady supply of raw materials they have been accustomed to for the last decades is coming under increasing pressure and is subject to geopolitical tension. 

In light of these risks, the EU has taken action. It has created an enabling environment that provides for significant opportunities in the development of new raw material supply chains and the recycling of existing deposits. At the same time, the EU is increasingly demanding of large companies in this sector, recognizing their central role in attaining supply chain security. As new opportunities arise, companies must also consider their responsibilities and new obligations to risk-proof their raw materials supply chain. 

Baker McKenzie's International Trade Practice has unique insights into both supply chain reporting and risk assessment requirements, as well as regulatory requirements for large infrastructure projects. It is poised to provide your company guidance on all issues in the context of raw material supply chains and the EU's new CRMA.