Securing the Future: Why Scarce Raw Material Sourcing Is Critical for Vertical Integration
In an era of global supply chain volatility, geopolitical shifts, and accelerating demand for critical resources, securing scarce raw materials has emerged as a cornerstone of Europe’s industrial and economic resilience.
With investments spanning technology, renewable energy, semiconductors, and advanced manufacturing, controlling the supply of materials like lithium, rare earth elements, and cobalt through vertical integration is a strategic necessity.
As Europe pushes toward technological sovereignty and net-zero goals in 2025, the race to secure raw material sourcing is reshaping industries and redefining investment opportunities.
Here’s why this matters, the unique challenges Europe faces, and how vertical integration offers a path to sustainable growth.
The Rising Demand for Critical Raw Materials in Europe
Europe’s ambitious agenda—embodied in the European Green Deal and the EU’s Critical Raw Materials Act (CRMA) of 2024—relies heavily on scarce raw materials.
Lithium and cobalt fuel the batteries powering electric vehicles (EVs), which the EU aims to scale to 30 million by 2030.
Rare earth elements like neodymium and dysprosium are essential for wind turbines, electric motors, and consumer electronics. Specialty metals like tungsten and gallium underpin Europe’s semiconductor and aerospace industries.
The International Energy Agency projects a sixfold increase in global demand for critical minerals by 2040 to meet net-zero targets, with Europe’s share of lithium demand alone expected to grow 12-fold by 2030.
Yet, supply struggles to keep pace.
Europe produces less than 1% of global lithium and cobalt and relies on imports for 87% of its rare earths, with China dominating over 80% of global processing.
Mining projects face long lead times—often 7-10 years—due to complex permitting processes and stringent environmental regulations under frameworks like the EU’s Environmental Impact Assessment Directive.
Recent disruptions, such as the 2023 closure of a major Swedish rare earth mine due to regulatory hurdles, highlight the fragility of Europe’s supply chain.
For industries central to Europe’s economic and environmental goals, securing raw materials is a pressing challenge.
Europe’s Unique Risks of Dependency
Europe’s heavy reliance on foreign suppliers exposes its industries to significant risks.
Price volatility can destabilize markets; lithium prices surged 400% between 2021 and 2022, impacting EV manufacturers like Volkswagen and Stellantis.
Geopolitical tensions, such as China’s 2023 export restrictions on gallium and germanium—critical for semiconductors—sent shockwaves through Europe’s tech sector.
Supply chain disruptions, like the 2024 Red Sea shipping delays, further strained access to materials sourced from Africa and Asia.
Regulatory and societal pressures add complexity. Europe’s commitment to sustainability, enshrined in directives like the EU Battery Regulation, demands ethical and environmentally responsible sourcing. Yet, reports of cobalt mining abuses in the Democratic Republic of Congo, which supplies 70% of the world’s cobalt, clash with these standards, putting pressure on companies to find alternatives.
Meanwhile, public opposition to new mining projects—such as protests against a proposed lithium mine in Serbia in 2024—complicates domestic production.
For investors, these risks translate into uncertainty. Companies without secure raw material access face production delays, cost overruns, and competitive disadvantages.
The 2024 EU Chips Act, aiming to double Europe’s semiconductor production by 2030, hinges on stable supplies of materials like silicon and gallium. Without them, Europe’s industrial ambitions could falter, impacting returns for investors in high-growth sectors.
Vertical Integration: Europe’s Strategic Shield
Vertical integration—controlling the supply chain from raw material extraction to final production—offers Europe a way to mitigate these risks and strengthen its industrial base.
By securing mines, refining facilities, or recycling operations, companies can build resilience and competitive advantage. Here’s why vertical integration is critical for Europe:
Supply Security: Owning or partnering with raw material sources ensures a steady supply, reducing vulnerability to global disruptions. For example, Swedish battery maker Northvolt’s 2023 investment in a Canadian lithium mine secured supply for its European gigafactories, stabilizing production.
Cost Predictability: Vertical integration shields companies from price volatility. By controlling refining processes, firms like Umicore, a Belgian materials technology company, have maintained stable costs for battery-grade cobalt and nickel.
Quality and Innovation: Direct oversight of raw material processing ensures consistency, critical for high-tech applications like semiconductors or aerospace components. Vertically integrated firms can also innovate, developing material-efficient designs or recycling technologies, as seen in Germany’s BASF investing in cathode material recycling.
Regulatory Alignment: In Europe, where ESG compliance is non-negotiable, vertical integration allows companies to enforce sustainable and ethical practices. This aligns with the CRMA’s push for 40% of critical materials to be processed domestically by 2030, reducing reliance on non-compliant foreign suppliers.
Strategic Autonomy: By reducing dependence on foreign powers, vertical integration supports Europe’s goal of technological sovereignty. Initiatives like the European Raw Materials Alliance, launched in 2020, encourage such strategies, fostering partnerships between miners, manufacturers, and recyclers.
Europe’s Challenges in Raw Material Security
Securing raw materials in Europe is no small feat. Mining projects face significant hurdles:
Capital Intensity: Developing a lithium or rare earth mine can cost $500 million to $1 billion, with long payback periods. Smaller firms often lack the capital, requiring strategic partnerships or private equity backing.
Regulatory Complexity: The EU’s stringent environmental and permitting processes, while critical for sustainability, slow development. A 2024 report by the European Court of Auditors noted that permitting delays averaged 5 years for critical mineral projects.
Public Opposition: Community resistance to mining, driven by environmental concerns, has stalled projects like Portugal’s Savannah Resources lithium mine. Balancing local interests with strategic needs remains a challenge.
Geopolitical Competition: Europe competes with the U.S. and China for access to global resources. China’s Belt and Road Initiative has secured stakes in African and South American mines, limiting Europe’s options.
Talent and Infrastructure Gaps: Scaling domestic mining and processing requires skilled labor and advanced facilities, both in short supply. Europe’s aging mining workforce and limited refining capacity—only 3% of global lithium refining occurs in the EU—pose bottlenecks.
For investors, these challenges underscore the need for rigorous due diligence.
Companies with strong vertical integration strategies—through acquisitions, joint ventures, or recycling initiatives—are better positioned to navigate these complexities. Our firm prioritizes such companies, ensuring they have the resources and expertise to execute.
The Broader Implications for Europe
The quest for raw material security is reshaping Europe’s economic and geopolitical landscape.
The CRMA sets ambitious targets: 10% of critical minerals mined domestically, 40% processed locally, and 15% recycled by 2030. Achieving this requires massive investment—estimated at €100 billion by 2035—spanning mining, refining, and circular economy solutions. Startups like Redwood Materials, which raised $1 billion in 2023 for battery recycling, and Europe’s own Cyclic Materials, focused on rare earth recycling, highlight the potential of innovative models.
This push also has geopolitical stakes. Reducing reliance on China and other suppliers strengthens Europe’s strategic autonomy, critical in a world of trade tensions.
The 2024 EU-U.S. Minerals Security Partnership, which facilitates joint investments in African and South American mines, is a step toward this goal. Meanwhile, sustainability demands are driving investment in green mining technologies, such as automated extraction systems and low-carbon refining, aligning with Europe’s ESG priorities.
For investors, the implications are profound. Companies that secure raw materials through vertical integration are not just mitigating risks—they’re shaping the future of industries like EVs, renewable energy, and semiconductors.
Sectors like green hydrogen, where Europe aims to produce 10 million tonnes annually by 2030, depend on secure supplies of iridium and platinum. Private equity firms, like ours, can drive value by backing firms that bridge these gaps, from domestic mining ventures to recycling innovators.
In Summary
In 2025, securing scarce raw materials is a defining challenge for Europe’s industrial and environmental ambitions. From lithium to rare earths, these resources are the backbone of the technologies driving the continent’s future.
Vertical integration offers a strategic path forward, ensuring supply security, cost stability, and alignment with Europe’s sustainability and sovereignty goals. Yet, the path is fraught with regulatory, financial, and societal hurdles that demand innovative solutions and bold investment.
We’re committed to supporting companies that take control of their raw material supply chains, turning scarcity into opportunity. For investors, this isn’t just about navigating risk—it’s about backing the businesses that will power Europe’s next industrial revolution.
In a resource-constrained world, those who secure the raw materials of tomorrow will lead the way.
