In March 2026, the EU and Australia signed a landmark trade deal that is expected to make Australian critical raw materials more affordable for the EU. However, while this move may ease some financial burdens, it does not fully address Europe’s ongoing dependency on China for these essential resources.
Critical minerals, also referred to as critical raw materials or ‘CRMs’, is a generic term that encompasses all materials critical to a country’s economy. The EU has listed 34 CRMs as essential to its economy, defence, industries, and technologies. This article will focus on 17 of those materials, which have been defined as Strategic in the 2024 Critical Raw Materials Act (CRMA), as necessary to produce low-carbon technologies in support of the Green and digital transition and for the defence and aerospace industries. These materials include lithium, cobalt, and nickel, which are essential for producing batteries. Gallium is used in solar panels, while raw boron is used in wind technologies. Rare earth elements (REEs) are used in magnets for wind turbines and motors.
These minerals are available in limited regions and require multiple processing steps after mining, such as concentration, chemical conversion, and purification before they can be used in batteries, magnets, solar panels, or other energy technologies. Refinement processes require large industrial infrastructures and specialised expertise, which is also available in a limited number of countries. For example, China is the main global producer of rare earth elements (REEs), as it mines 70% of the global supply and it controls 90% of its refinement, as well as 60% of lithium refinement. In addition, China processes 90% of rare earths and 60% of lithium, even when these materials are sourced elsewhere.
CRMs are essential for Europe to meet its climate objectives outlined in the European Green Deal, launched in 2019 and aiming to cut emissions by at least 50% by 2030, alongside building capacity for more renewable sources to power Europe. Europe, while it has these natural resources, currently has limited mining and processing capacity. Europe is dependent on China for the 100% of the supply of REEs, 97% of magnesium and 80% of lithium, meaning that its green transition is over-reliant on supply from China. This dependency on a single supplier is problematic because it leaves European markets vulnerable to sudden economic and geopolitical shocks. This has been evident when China introduced restrictions on the export of rare earths in 2025, requiring European firms to obtain licenses and disclose how these materials were used. While on November 7, 2025, the Chinese government announced the temporary suspension of the second wave of export controls until November 10, 2026, Europe remains exposed to supply chain disruptions.
To tackle these dependencies, the European Union set benchmarks by 2030 in the CRMA, including encouraging extraction of critical materials within the EU and sourcing 40% of consumption from EU processing, 25% from domestic recycling and no more that 65% of a single material from a single third country, alongside the selection of strategic project to reduce dependency on imports from single countries’ supplies and reinforce security of its supply chain. It is within this framework that the EU and Australia have concluded their trade deal on March 24, 2026. The trade deal, which will come into effect in the coming years, aims to remove import duties on Australian exports to the EU, including critical minerals. Australia is a resource-rich country with over 350 mines from which minerals such as for lithium, manganese, titanium, aluminium, and cobalt are extracted (Australian Government, 2026). This deal will reduce or eliminate tariffs on CRMs and make Australian exports more competitive in the EU.
However, the benefits of this agreement for Europe on the supply of CRMs are not as straightforward or immediate. Firstly, Australia’s rigorous legislative standards and strongly regulated labour market, make it a high-cost jurisdiction. While the deal includes provisions to ensure that these materials are sourced securely and in in a socially responsible way, following these standards signifies that exporting materials from here might be more expensive than from China, where the state actively directs investment and subsidises production in the mining sector, allowing it to absorb costs that market-based economies like Australia cannot (Europe Says, 2026).
Secondly, Australia does not have a well-developed capability for processing or value-adding to raw materials. This means that after mining, materials require further industrial processes before they can be used in batteries or solar panels. The government is steadily investing in developing technologies for refining critical materials, but building industrial infrastructures might take years or decades. Until then, Australian ore will still need to travel through Chinese refineries before reaching European manufacturers, meaning the EU’s dependency on China shifts upstream but remains intact for refined products. Thus, the real benefits will become evident only once Australian refineries are developed.
It is important to note that, if Chinese tariffs are reinstated in November 2026, the EU-FTA. agreement won’t be able to cover the imports at that time. Additionally, it is too early to evaluate whether this agreement will help meet the 2030 deadline set by the Green Deal. Therefore, while there will be advantages in the long run, the agreement does not provide an immediate solution to Europe’s dependence on China for refined materials.
Looking ahead, it is essential that the EU focuses on building internal capabilities to meet its demand for CRMs, as the demand increases as technology develops. These capabilities entail effective use of the substantial resources available within European territory by increasing mining, refining, and recycling. Increasing recycling of critical minerals within the EU could reduce import dependency without relying on new foreign supply chains and is already targeted under the CRMA’s 25% recycling benchmark. The EU has already written structured proposals, and the European Commission has approved 60 strategic projects under the EU CRMA, covering 14 of the 17 strategic raw materials. The future challenge will be to budget accordingly and convert these projects into operational realities through adequate funding.
In conclusion, the EU-Australia FTA is a necessary and welcome step, but not a sufficient one. As recent Chinese export restrictions have demonstrated, the EU’s exposure to a single supplier is not merely a theoretical risk, but an active vulnerability with a deadline. If internal refining and processing capacities remain underdeveloped, the new FTA risks replacing dependence on Chinese products with dependency on Australian ones. The EU has the resources, the proposals and the frameworks; what it now needs is the urgency to match them.
Further Readings
Dikau et al. (2023) ‘What are ‘critical minerals’ and what is their significance for climate change action?
Europe Says (2026) The EU–Australia FTA plays the long game on critical minerals with no short cuts.
Pacheco (2026) EU’s climate goals at risk without China’s critical raw materials, EU auditors warn