Critical Raw Materials – Strategies for resilience

Critical Raw Materials (CRMs) are indispensable for the green energy, digitalization, and defence industries. Current CRM supply chains rely heavily on mining and face growing risks—particularly political instability in mining regions (e.g., cobalt in the Democratic Republic of Congo) and the concentration of refining capacity (over 60% of cobalt refining occurs in China). In response, the EU introduced the Critical Raw Materials Act (CRMA), aiming to increase CRM recycling and expand Europe’s refining capacities. The initiative aims to reduce dependence on non-EU sources through a dual focus on primary (mined) and, more importantly, secondary (recycled) CRMs.

According to own claims, businesses are stepping up by seeking to shift from primary to secondary CRMs as part of broader strategies to diversify supply chains, improve material efficiency, and reduce their environmental footprint.

Low Recycling Rates. Recycling rates for many CRMs are currently low, e.g., Neodymium at ~3%, Lithium at nearly 0%, and Cobalt at 22%. The bottlenecks can be found in almost every part of the secondary CRMs value chain starting from unfit collection systems, insufficient end-of-life (EoL) product volumes, complex and heterogeneous product designs, low concentrations of CRMs in products, and finally recycling technologies adapted to the recovery of high-volume materials. These obstacles make CRM recovery of recycled CRMs technologically and economically challenging, hindering progress toward the 25% recycled content target set by the CRM Act.

Weak Economic Incentives. The absence of strong economic incentives for investing in recycling technologies and expanding capacity discourages businesses from using secondary CRMs. This stalls the development of a sustainable recycling market. Secondary CRMs struggle to compete with virgin materials’ lower production costs, market domination by monopolizing countries, and limited benefits beyond environmental impact.

Regulatory Unclarity for OEMs. Unclear regulations on measuring recycled content and ensuring compliance create significant challenges for original equipment manufacturers (OEMs). Key questions remain unanswered:

• What does a 25% recycled content requirement mean in practice?
• Will the requirement apply to all CRMs combined or be assessed for each CRM individually?
• Will the calculation consider the value of materials, or will it be based purely on volume?
• How will post-consumer and pre-consumer waste be weighted in the calculation?
• What are the measurement points, especially when parts of the recycling process take place outside Europe?

This regulatory uncertainty can delay investments and innovation, as businesses hesitate to act without clear directives. Standardized methodologies and regulatory clarity are essential to enable effective planning, investments, and innovation in circular economy strategies.

Limited applications for some recycled CRMs. Downcycling (a quality reduction after recycling) remains a significant challenge for several CRMs, where the quality of recycled materials diminishes, limiting their application in high-performance industries. For instance, recycled aluminium often is contaminated with impurities like iron, reducing its strength and restricting its use to lower-grade applications like construction rather than aerospace or automotive industries; or nickel from stainless steel dilutes carbon steel. Future solutions may focus on more selective sorting to improve lithium recovery efficiency and reduce contamination. Shifting from pyrometallurgy (high cost, low throughput) to hydrometallurgy (lower cost, but energy-intensive, generates lots of wastewater, and with higher purity products) could enhance sustainability, while emerging direct recycling methods may further optimize material reuse.

Action 1 - Promote scalable recycling technologies

Investing resources—money, knowledge, time, and expertise—in advanced recycling technologies is critical to improving CRM recovery rates, increasing volumes, and enhancing the quality of recycled materials for high-tech applications. Emerging technologies such as hydrometallurgical processing, electrochemical recycling, pyrolysis, and bio-metallurgy show great promise in increasing recycling efficiency and addressing the challenges of downcycling. For instance, hydrometallurgical processes can achieve recovery rates of up to 95% for cobalt, manganese, and nickel from EV batteries. China's recycling ecosystem is notably advanced; e.g., Zhejiang Huayou Cobalt have developed extensive recycling operations, including hydrometallurgical techniques, to reclaim valuable metals from spent batteries. These efforts should not be limited to EoL products (post-consumer waste) but must also include pre-consumer waste from production, which often represents a significant portion of material feedstock for recycling.

Action 2 - Design for recycling

OEMs can accelerate the adoption of new technologies and reduce recycling costs by incorporating recyclability into product design from the outset. This includes innovative designs that facilitate easier collection (e.g., traceability systems) and material recovery processes such as disassembly, separation, and refining of CRMs. Special attention should also be given to integrating recycled materials into product designs to address the challenges of downcycling. Investing in R&D is a critical first step, with a focus on retaining valuable CRMs within supply chains, ensuring regulatory compliance, and enhancing long-term competitiveness.

Action 3 -  Forge strategic partnerships

Collaboration is not just a recommendation but a necessity for advancing the secondary CRM journey. Partnerships across the value chain shall address capability gaps and support developing shared solutions, such as identifying CRM-rich waste streams, implementing take-back systems, and co-developing recycling technologies. Partnerships with industry peers, recyclers, and regulators can take the form of, e.g., discussion forums, material traceability systems, research projects, or data exchange platforms. The ultimate goals are to improve collection rates, optimize recyclability (maximize recovery), and tackle downcycling challenges (maximize quality) for secondary CRMs.

Action 4 - Leverage economic and regulatory opportunities

Finally, businesses must thoroughly understand current legislation (i.e., CRM Act, ESPR,New battery regulation) by actively monitoring the regulatory landscape and analyzing its impact. Equally important is preparing for future legislation (i.e., ELV regulation and an updated WEEE directive) by staying ahead of emerging trends and incorporating anticipated compliance requirements into their strategies. Proactively adapting to evolving policies enables businesses to mitigate risks, maintain a competitive edge, and seize new opportunities.