Dear Patient Readers, I cannot publish the article I planned and researched because I suddenly became very ill from something that I hope is just food poisoning. So I’m going to post this cross-post instead. All my excuses ! –lambert
By Violaine Faubert, economist at the Banque de France, Nathan Guessé, graduate student in economics at ENSAE and the Institut Polytechnique de Paris, and Julien Le Roux, principal economist in the European relations unit at the Directorate General for Statistics, Economics and International Affairs at the Banque de France. Originally published on VoxEU.
The energy transition will require the extraction and processing of large quantities of essential raw materials in countries geopolitically distant from the EU. This column documents shareholdings in extractive companies, essential information to accurately assess the EU’s strategic dependencies. Investors from outside the EU control a significant share of the capital of global listed companies involved in the extraction of cobalt, copper, lithium, nickel and rare earths, underscoring the need to strengthen the strategic autonomy of the EU and to develop a specific strategy for metals in the future.
The EU has recently adopted legislation to increase the security of its critical raw materials (CRM) supplies and to make itself more strategically self-sufficient (Critical Raw Material Act 2024). While the energy transition will require large quantities of CRMs, CRM mining and processing is concentrated in countries that are geopolitically distant from the EU (see Figure 1). For example, 73% of all cobalt is mined in the Democratic Republic of Congo (DRC), 69% of rare earth elements are mined in China, and half of the world’s nickel supply is mined in Indonesia (USGS 2023). This concentration of supply raises concerns that dominant countries may use their market position as leverage to pursue other strategic priorities (Buysse and Essers 2023), highlighting the urgent need to strengthen the EU’s raw materials strategy.
The geographic concentration of production is compounded by a concentration of companies controlling the supply of CRM, giving rise to oligopolistic market structures (IRENA 2023). A handful of multinational corporations and state-owned or state-controlled enterprises dominate a considerable share of global production. For example, the four largest mining companies control approximately 55% of global cobalt production, while the five largest mining companies control 80% of global lithium production.
Figure 1 Share of global production of EU imports (x-axis) versus geopolitical distance of CRM producers from the EU (y-axis)
Note:Geopolitical distance reflects states’ positions toward the US-led liberal order, based on a dynamic ordinal spatial model, using United Nations General Assembly votes as datum. ‘entrance. The indicator has no unit and ranges from zero to six. Only the two main producing countries are shown for each mineral and each production stage. C denotes natural graphite, cobalt Co, copper Cu, lithium Li and nickel Ni. AUS stands for Australia, BRA Brazil, CHL Chile, CHN China, COD Democratic Republic of Congo (DRC), FIN Finland, IDN Indonesia, PER Peru, PHL Philippines and RUS Russia.
Sources:Bailey et al. (2017), European Commission (2023) and authors’ calculations.
Non-European investors control a significant share of the capital of listed CRM mining companies
If the geographic concentration of resources is well documented (IRENA 2023, Javorcik et al. 2023), ownership interests in extractive companies are less so. Yet, documenting the sources of control of mining companies is essential to assess strategic dependencies. Building on Leruth et al. (2022), we design a comprehensive database documenting the shareholder origins of global publicly traded companies involved in the mining of cobalt, copper, lithium, nickel and rare earths (Faubert et al. 2024) .
We develop several indicators to map the geographic origin of capital holders, including production-weighted and market-capitalization-weighted ownership rates, complemented by indicators focused on majority stakes. All indicators suggest that non-EU investors control a significant share of the capital of publicly listed CRM mining companies.
Figure 2 summarises ownership rates by investor origin for cobalt, copper, lithium, nickel and rare earths. China’s leading position is particularly notable in the mining of rare earths, cobalt and, to a lesser extent, lithium. In contrast, European investors hold limited stakes in CRM mining companies. The relatively high EU ownership in the nickel sector partly reflects investments located in Cyprus representing Russian interests. In addition to China, US investors also hold significant stakes, particularly in the lithium and copper sectors. Although Latin American investors hold significant stakes in lithium and copper companies, they are under-represented relative to the region’s share of global production. Australian investors’ weight is relatively limited in lithium given the country’s significant lithium resources. Indeed, while Australia accounts for half of the world’s lithium production (USGS 2023), two of its largest lithium mines are owned by Chinese companies.
Figure 2 Production-weighted holding rate in listed mining companies specializing in critical raw materials
Note:EU stakes in the nickel mining sector, where Russian investors are estimated at 15%, are closer to 4% if EU investors representing Russian interests are excluded. EU stakes in the cobalt mining sector, where Russian investors are estimated at 3%, are closer to 1% if Cypriot investors representing Russian interests are excluded.
Sources: Refinitiv and authors’ calculations.
Figure 3 highlights the gap that can exist between the geographical concentration of production and that of investors analysed through company ownership. US investors and, to a lesser extent, EU and UK investors play a more significant role in the supply of copper and lithium compared to production located in their respective countries. In contrast, Chinese investors hold significant stakes in nickel and cobalt companies, while these minerals are mainly mined in Indonesia (nickel) and the DRC (cobalt). In contrast, for rare earths, production and capital ownership are aligned, with both the US and China being major producers and investors.
Figure 3 Geographic concentration of production and ownership
Note:Nickel production is geographically concentrated in Indonesia, which results in a substantial contribution from the “other” category in the bar chart that breaks down nickel production by region.
Sources: US Geological Survey, Refinitiv and authors’ calculations.
Strategic investors play an important role in CRM exploitation
Table 1 documents the predominance of strategic investors such as state-owned enterprises and other strategic investors (including founding families, board members or management teams) in the ownership of companies involved in rare earth mining and, to a lesser extent, in cobalt, lithium and copper mining. Chinese investors are overwhelmingly strategic investors, which is consistent with the literature (IRENA 2023). Indeed, strategic investors account for 86% of Chinese investors’ holdings in the rare earth sector. Strategic investors also play an important role in the exploitation of lithium and copper resources located in Latin America. Strategic investors account for 67% of Latin American investors’ holdings in lithium mining companies. Overall, the last column of Table 1 confirms the predominance of strategic investors for rare earth companies, which are largely owned by Chinese investors. Strategic investors also own more than a third of the capital of companies involved in the extraction of cobalt, lithium and copper. For example, two strategic entities (the Chilean Pampa Group and the Chinese Tianqi Lithium) control half of the capital of Sociedad Quiımica y Minera (SQM), the second largest lithium company in the world.
Table 1 Share of strategic investors in CRM mining companies in 2022
Note: Strategic investors account for 86% of Chinese investors’ holdings in the rare earth sector.
Sources:Refinitiv and authors’ calculations.
Conclusions and policy implications
Our database provides an overview of shareholdings in listed mining companies amid growing geopolitical tensions. Although the EU CRM law aims to reduce strategic dependencies by diversifying EU supplies, it does not address the vulnerabilities associated with the concentration of mining capital. Indeed, the CRM law sets diversification objectives at the level of the producing country. These objectives do not address concentration risks linked to capital ownership. However, assessing concentration in the mining sector through shareholding data shows a very different picture from that of the geographic location of mines. Therefore, our database could be useful for identifying vulnerabilities related to capital holding and for refining diversification objectives.
The CRM Act also aims to improve the EU’s capabilities in the extraction, processing and recycling of critical raw materials. The development of the European mining industry will require substantial funding from private sources (Hache and Normand 2024). Given the EU’s commitment to strengthening its economic security, assessing the sources of control of European mining companies is crucial to assessing supply and geopolitical risks within the EU. In this context, our results suggest the need for increased transparency regarding the sources of control of new mining projects announced in the EU.
Overall, our analysis highlights the need to strengthen the EU’s strategic autonomy and suggests the need for a specific metals strategy. In particular, our database could play a key role in guiding investment decisions, should European entities seek to increase their stakes in leading CRM companies.
Authors’ note: The opinions expressed are those of the authors and do not necessarily reflect those of the Banque de France.
References available in the original.
