“CEOs Must Become Diplomats for Their Own Causes”

The German Chancellor in Japan, critical raw materials, China's head start and Europe's room to act: an interview with Henk de Hoop, CEO of SFA Oxford

The German Chancellor is Big in Japan this week, and so is our Beyond Beta briefing.

Friedrich Merz and his delegation of CEOs want to draw inspiration from Japan's strategy for reducing its dependence on China for critical raw materials. At the heart of Japan's success is the raw materials agency JOGMEC, which uses state funds to invest in mining projects worldwide and maintains stockpiles. JOGMEC is often envied in Europe, German industry would like to see a similar model for Germany. An initiative led by carmaker BMW plans to present its concept for a joint raw materials trading house in November, reports Politico.

Absolutely the right move, says our guest this week, Henk de Hoop, CEO of SFA Oxford, the globally leading analytics company for critical raw materials, and himself a critical raw materials veteran with 30+ years of industry experience. Politicians alone cannot help here: "Some companies are already shut out of the supply chain for these metals or dual-use components, because China has put its foot down. (...) As a CEO struggling with a risky supply chain, you must become a lot more geopolitically savvy and engaged. You must push this much higher up on the government agenda. Talk to your industry peers and the broader supply chain. (...) CEOs must become diplomats for their own causes."

However, Henk de Hoop and other experts also observe that German DAX companies and other European players are still feeling their way around this topic as relative greenhorns. A dangerous phase, he warns: "Lots of money has been burned in the mining industry, even by very reputable big companies like Rio Tinto, BHP and Anglo American. They all carry scars from billion-dollar losses because, despite all the work and professionalism involved, they overlooked X, Y or Z, and it proved extremely costly. So, it is not investing for sissies."

So what can European CEOs do? Recycling is not as effective an answer to the problem as the EU Commission and its Critical Raw Materials Act would like it to be. "Substitution, looking for alternative metals in your products, and reducing your dependency, is absolutely critical. However, you often find that alternatives do not deliver the same performance, efficiency or energy usage. (...) So heavy investment into R&D, now especially turbocharged using AI, is definitely a must."

How can Europe tackle the critical raw materials crisis, and are politics and industry in sync? Here is the full interview.

Kirsten Rulf: In Europe, in the past few months alone, there have been a lot of developments around access to Critical Raw Materials. We see rapid implementation of key projects of the Critical Raw Materials Act and Ursula von der Leyen even mentioned the founding of a new corporation on Critical Raw Materials in her State of the Union speech. At the same time, there is now a lot of talk about mining our own critical raw materials. You have decades of experience in mining, mining finance, and now analysis. How would you evaluate the idea to start mining in the EU?

Henk de Hoop: I find that there is a lot of naivety and ignorance in Europe about what it actually takes to build a profitable mine, and about the timelines and investment involved in such projects. To begin with, finding a mine is probably the hardest part. There are a lot of elements on the periodic table that would on paper be available in Europe but will never be economical to mine here. If I drop a probe into the soil next door here today, I will find lots of metals, also rare earths, but none of them in economic quantities. That is often misjudged by reading just the headlines in Europe. Geology is geology. Economically mineable deposits are scarce, geology bound, and hardly ever in locations where you want them to be. Hence, we have to go out to places like South America or the Congo to secure our copper for example.

On a positive note, what I do see now is that the politicians have at least started talking to Canada, Australia, Japan and other allies. Saudi Arabia is also currently doing a massive search campaign, going through all their old data, retesting some of their old samples, and finding critical raw material. So, there are still plenty of opportunities for the EU to find allies with prospective geology out there.

That is exactly what is needed: a combination of forces. Because we will never become self-sufficient in Europe when it comes to all of the metals considered critical or strategic.

Kirsten Rulf: Just as a thought experiment, what would it need to build a viable mine here, and how long would it take?

Henk de Hoop: First, you start off searching on a very wide grid, and there is a lot of geological work beforehand: field mapping, aeromagnetic surveys, analyzing historical data etc.

Many projects already drop out as a possibility along that way. You might start with 10 possible projects in the campaign, and at stage two of the assessment, seven already fall away. With the remaining three, you then go into more detail and find: oops, there is actually far less useful metal than expected. Or the geological distribution is so poor that mining will not be economical. Or there are contaminants that will result in very poor recovery or result in an unsellable concentrate. So, at every next stage of study or fine tuning promising projects fall away. But many politicians assume that once you have found some metal in the ground, you will automatically start a mine eventually down the line. If you started a proper focused geological campaign in Europe today, starting with a first stage filtering process, up to an actual feasibility study, it would probably take at least ten to twelve years to get there. So, this is not a matter of "let us set a policy and provide money and, hoppa, we have got a mine up and running in 5 years".

Kirsten Rulf: And once you have a positive feasibility study, what comes next?

Henk de Hoop: Then come all the engineering studies, which cover not only the mining side but also the processing route of the interesting minerals to actually retrieve them out of the soil or rock. That often means a lot of laboratory work, which also takes time. Because what you want to know very early on is whether you can recover that metal at a high enough yield and with the right quality. And you need to know what comes out as waste: Am I allowed to deposit this toxic waste close to the mine, under what conditions, and will it remain stable in the long term? It is a very expensive and multi-year testing and optimization exercise.

Kirsten Rulf: Let us say a European mine is finally producing. Does that solve the supply chain problem for European companies?

Henk de Hoop: No, because a mine only gets you a concentrate of these metals, and a concentrate is only the start. Next, you need to process it, for example in a specialized smelter, and every metal follows a different route to eventually refined metal or metal salts. Take copper: there might be a smelter in Bulgaria, but it may not be able to treat the concentrate from the just discovered European copper mine because of the by-products it contains. Copper smelters are not all alike. So, even if you have the mine in Europe, you may need to send the copper concentrate somewhere else outside of Europe for refining. But until you have done all the studies, you cannot predict whether your concentrate can be treated in Europe at all. And then there is the question of demand: you would have to be exceptionally lucky to find the metals, in the right mix, of the right quality, and in the right volumes to match or nearly match European demand.

Kirsten Rulf: Why would there not be demand for that European metal?

Henk de Hoop: Take rare earth mining for example. The economics of rare earth mining can be rather scary: a deposit might produce say six elements, some of them worthless but still needing to be disposed of one way or another, or sometimes it contains radioactive by-products. Rare earths in particular are difficult to process and upgrade, given the often dozens of complex chemical processing steps to concentrate and purify the individual elements. Eventually producing the metal in Europe does not mean anyone will buy it simply because it is "sovereign metal". Companies mostly care about the cheapest price. At SFA Oxford, we have done some work on the achievability of a green premium for lithium for example. A lot of mining companies believe: if we produce our lithium green, we will get more money for it. That has proved so far to be wishful thinking. Nobody is prepared to pay extra for green metal yet, unless regulation forces your hand and you absolutely cannot sell your end product without that green material in it.

Why Are DAX Companies Investing in Rare Earth Mines?

Kirsten Rulf: Nevertheless, I saw a lot of names investing in mines that surprised me. Schaeffler, BMW and others are big in the market, also BASF for chemicals. Why are these companies getting involved and how do you see that market for European companies that are not traditional mining companies?

Henk de Hoop: These companies started about five to eight years ago to help finance new projects in certain regions without Chinese influence to get these new mining projects off the ground quicker. I think companies like BMW and General Motors are still feeling their way around the mining industry. Sure, they can help fund a rare earth mine. But first of all, these companies do not invest in greenfield projects where hardly any geological work has been done. So, they probably would not finance projects in Europe. They go for projects that are already a couple of years further along, or that have had a lot of the scientific work done already. Projects, for example, that have at least a feasibility study done.

Financing new projects is risky, because the track record of start-up mining projects is very mixed. In my time as a banker, I had lots of mining companies pitching projects to me, and there are at least 200 reasons why a banker will say no. Lots of money has been burned in the mining industry, even by very reputable big companies like Rio Tinto, BHP and Anglo American. They all carry scars from billion-dollar losses because, despite all the work and professionalism involved, they overlooked X, Y or Z, and it proved extremely costly. So, it is not investing for sissies.

Plus, the problem for BMW, Schaeffler and others is that this financing of mines still does not give them an end product and it does not make them more sovereign or less dependent on China.

The good news is that they have all woken up. This is not a two-year solution, but over the last three years it has become a real CEO-level topic. We at SFA Oxford have had far more calls than ever before around sourcing of scarce metals, now also from the defense industry. That is partly because China has taken some very tough steps on exports of niche metals. BMW and General Motors are probably only too aware of that: if tough, restrictive decisions are made, they will have a problem very quickly. Within perhaps 6 to 12 months, their production is on hold.

Kirsten Rulf: Which brings us to the fact that China not only controls the critical raw material mining industry, but, almost more importantly, 95% of the processing industry that turns rare earth into magnets and other products that the automotive, defense, and energy industry needs.

Henk de Hoop: That is the reality. Much of the control will remain with China, simply because it keeps on growing the downstream processing industry. Europe is trying to break in, but gaining any ground in such a fast-growing market is not easy. And China has 30 years of optimization on us, particularly in the technology in the middle of the processing chain, as the West allowed the skills and capacity to shift in decades past. China now has a huge head start. It also knows there is a threat out there and it wants to continue to dominate. So, China has been stopping any processing technology from crossing its borders. They are basically saying: "We are no longer selling these lithium upgrade machines or this refinery technology. And forget about rare earth refining technology!"

And even if Europe manages to gain some ground, in magnet manufacturing for example, there are some 40 different grades of magnet alloys out there, each with its own market. Which one do you bet on? Where are you going to focus? Again, China has spent years optimizing these grades of magnets, because it had so many clients and such diverse players in that space. Even if you get one, two or even six magnet producers up and running in Europe: Can they be economically viable? Have they got enough customers in Europe? Will they cover 80% of European demand across magnet qualities, given the enormous variety of grades? Or will they just scratch the surface, at 15% of what is needed? In that case, you have not solved your problem.

I would not call it an entirely lost race in rare earth processing, but starting from behind, we have to be realistic: Europe is not going to fully catch up.

Kirsten Rulf: Besides magnets, many other technologies depend on these materials as well, chips, for example...

Henk de Hoop: In general, we underestimate how complex our modern products are. Some of them need 30 or 40 different critical raw materials. So even if you as the CEO have secured supply for five of them, you still cannot build the product, if element number six or seven is blocked by a market actor or unavailable for other reasons. I can understand why CEOs and others, like R&D professionals, talk about this topic so much: there are so many angles to the supply chain problem, and so many reasons why and where the supply chain can break. Everybody in the large European companies must be aware of the need to solve this problem. But I think there is still little understanding of what is required and how company leaders could act.

Substitution and Recycling: What Is the Way Towards More Sovereignty?

Kirsten Rulf: What, from your perspective, could they do? There is a lot of talk about recycling and substitution, for example with the synthetic tetrataenite and other lab-made substitutes. Could recycling and substitution be the way out?

Henk de Hoop: It must be a combination of those things. Substitution, looking for alternative metals in your products, and reducing your dependency, is absolutely critical. However, you often find that alternatives do not deliver the same performance, efficiency or energy usage. But sometimes that is the price you have to pay, rather than producing nothing at all because you cannot access the metal you need. So heavy investment into R&D, now especially turbocharged using AI, is definitely a must.

Recycling is another part of the answer. But some people in Europe, let us call them the green thinkers, believe recycling can solve everything. Not in a growing economy. Very few metals can be recycled endlessly without losing either quality or volume through yield losses. Recycling has its benefits, but the continued need for new material should not be underestimated or wished away.

What is very important for CEOs and policymakers alike, I think, is to be strategic about sharing the necessary skills and cooperating in the "lottery" of geology. And that is exactly what is happening, at a certain pace: Europe is linking up with Canada, Australia, Japan, Taiwan, Africa, South America politically. CEOs must become diplomats for their own causes, too. Take Canada for example. It has cheap power. And now that America has said it does not want Canadian aluminum anymore, Canada would happily produce cheap, abundant aluminum and send it to Europe. So, as a CEO look at the broad range of partners who can help you: Who has the strongest comparative advantage in producing a particular good? What can you offer them?

And in a way Europe is benefiting from the current US way of doing business that is not necessarily helping it make friends around the world.

Kirsten Rulf: What can Europe and European CEOs offer these key partners?

Henk de Hoop: That is something that European politicians and CEOs have to consider carefully. Talent would be a good option. But we need to consciously work on that. Let me start with some background. When I finished studying in 1992, there were 85 students in my year at Delft University. Probably 80 or 90 percent went into oil and gas, and only 5 of the 85 ended up in mining engineering. And this diminishing talent flow into extractive industries has become worse over time. The perception in Europe was: mining is not for us anymore, we do not need it. Mining was almost an ignored industry. Of course, the mining industry has always been there, and it is massive outside of Europe. But if you shut down an industry for 40 or 50 years, not only is much of the original knowledge gone, more importantly, you have also missed 40 years of progress. How things were done in 1980 is very different from how they are done in 2026. A lot of research elsewhere outside of Europe has gone into optimization, fine-tuning, digital know-how and IP.

A lot of that knowledge now sits in China, in the US, to a certain extent, but also in Canada, South America and Australia, the big mining regions that have stayed close to the industry and have the educational institutions to stay up to date. Without the latest talent and innovation, we will always be on the back foot. Many new companies around the world are looking at new processes and trying to catch up, because that knowledge is very much locked up in China.

That is why it is so important for Europe to connect with them. I lived in South Africa for 30 years, and there is a surplus of engineers there, because some of its mining sectors are shrinking. Australia, by contrast, is growing quite fast, and projects in Canada, South America and Africa are getting off the ground, so a real skills shortage is already developing. If Europe wants to build a knowledge center, it probably must tap into some of those talent pools first, or into people coming out of those industries in Australia or elsewhere who perhaps are willing to go back to Europe. And then build from there, to have the skills and have a bargaining chip in the future.

What Should a CEO Do as a Next Step?

Kirsten Rulf: As a last question: If you were the CEO of a defense company and fully dependent on rare earths: How would you tackle that entire value chain of mining, refining, recycling? And what else would you be thinking about?

Henk de Hoop: We have already had inquiries from CEOs on this question following the last so-called blacklist that China issued, where they named a range of companies, including European defense companies, that will no longer be supplied with critical metals. So, this is not a theoretical scenario, some companies are already shut out of the supply chain for these metals or dual-use components, because China has put its foot down. Unfortunately, there is no quick fix. But one next step is now crystal clear: as a CEO struggling with a risky supply chain, you must become a lot more geopolitically savvy and engaged. You must push this much higher up on the government agenda. Talk to your industry peers and the broader supply chain. If you had asked that question as a CEO five or eight years ago, you probably would not have found any support or even a listening ear for the topic, not from your shareholders, not from the government, not from your suppliers, who would have said: "Do not worry, we will always get these materials to you." That is very different now. Today, your shareholders understand that it is a critical risk to your company's survival. The government understands it is a critical risk to the nation's defense, and that it risks losing the company to perhaps foreign direct investment or foreign regulation from a non-friendly power, if it does not help secure supply.

There is no way any one company or even an industry alliance can solve this alone. It needs strong partnership with governments and the entire supply chain.

Kirsten Rulf: That has been a fascinating conversation. Thank you so much for your time and for all your expertise.