“This Is Not Investing for Sissies!”

In about 8 weeks, China will pull the plug on a critical part of the supply chain for defense companies, for energy, for automotive companies, for AI data centers, and for manufacturing. In Mid-November, as announced a year ago, it will impose export controls on products, equipment, and technologies related to rare earth elements, on semiconductors, on superhard materials, and lithium batteries, among others. Production in Europe will halt, prices are already going through the roof, European companies will lose billion Euros in revenue, as the European Central Bank estimates. Politicians and CEOs will talk about little else in the winter months. "We have sharply increased inquiries based on the most recent "blacklist" that China has sent out, where they named 14 European companies, including defense companies, that will not be able to have access to their niche metals or materials anymore", says Henk de Hoop, when I met him for our BeyondBeta-interview. De Hoop has been one of Europe's principal industry experts on Critical Raw Materials. For nearly 30 years he has been working in both mining engineering and mining finance. He has himself worked in mines in South Africa as an engineer. Today Henk de Hoop is CEO of SFA Oxford, which delivers highly specialized market analysis and advises business and political leaders globally on their REE strategy. "It is already happening today in real time that some companies are shut out of metals or components, e.g. dual use components, because China has put its foot down."

And yet, I initially thought that this Layer Zero of sovereignty hardly deserved our attention. "Beyond Beta" aims to be solution-oriented, not problem-admiring. And with Rare Earth Elements (REE) and Critical Raw Materials, it is a truism, that Europe and the rest of the world is fully depended on Chinese exports and refinement, and that there is nothing that can be done about it.

What a mistake! Critical Raw Materials is a layer of sovereignty where Europe's CEOs are for sure not done fighting. Far from it!

Did you know that Solvay, Schaeffler, BMW, and tk accelis GmbH (until June thyssenkrupp Materials Services GmbH), are some of the largest investors in actual new REE mines around the world? Have you heard about a chemical called P507 that is crucial to mine REE and that few companies other than BASF and Solvay can produce economically? Which makes it a suitable geopolitical bargaining chip, of course. Besides, Europe is driving innovation: Renault, BMW, and Mahle are frontrunners in REE-free car components.

When it comes to REE and sovereignty, European CEOs of manufacturing giants to automotive companies, the demand side of the market, is newly pushing into all stages of the supply side. Some of these CEOs, investors and experts agree, are perhaps making too unprecedented and daring strategic moves in a highly political territory that is unknown to them: "Lots of money has been burned in failed mining projects, even by very reputable big companies like Rio Tinto, BHP, Anglo-American", says Henk de Hoop in our interview. "They all have scars of billion-dollar losses because they, even with all their decades of professionalism and experience applied, overlooked or missed something critical, causing the overall project to become uneconomic or inexecutable. So, investing in the mining industry is relatively high risk and not for sissies."

As the weeks tick down until the Chinese ultimatum runs out, we will periodically brief you in episodes of our newsletter and bring you up to the mark before the story hits the headlines. Already the global debate is simmering, and we add a new article on Rare Earth Elements (REE) to our “signals” section almost every day. And yet again we will encounter the question, if and why the policy response is so disconnected to what CEOs are trying to do -- and how that could change.

Our research on REE and sovereignty led us to Narva in Estonia, a town from where you can walk across the Russian boarder in under 20 minutes. Here the EU let Canada build a highly strategic company, giving millions of Euros in subsidies and a building permission within only weeks. The journey will lead us to Bitterfeld in East Germany and Heraeus' unique REE recycling technology plant there. We will introduce you to the frontline innovators in the Critical Raw Materials space, to the R&D labs, where engineers claim to be the frontrunners in developing products with far fewer REE. We will visit edge innovators like the Oxford University startup which develops technology to extract critical minerals and REE from volcanic rock and underground geothermal brines, and the University of Vienna research group that investigates "mycomining", a technique that uses fungi and mushrooms to extract REE from industrial waste and contaminated soils. And of course, we stopped at Brussels and the German Bundestag.

However, we will start with a full interview with Henk de Hoop on www.BeyondBeta.eu, covering an overview of the entire supply chain of Critical Raw Materials, the strategic steps that demand-side CEOs can make, who are not as audacious or deep-pocketed, and with de Hoop's perspective on REE recycling and the efforts of the EU Critical Raw Materials Act on that front.

Can European companies and politicians succeed in jointly crafting at least some geopolitical bargaining chips on Sovereignty Layer Zero? Or is it too little too late? Not necessarily, says expert de Hoop. However, there will be heavy losses. "But sometimes that is the price to pay. Rather than not producing anything, because you do not have the access anymore to the particular REE that you need."

Read more later this week on www.BeyondBeta.eu