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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is chief executive of Trafigura
Europe faces an uncomfortable truth. Having largely solved its dependency on Russian gas, it now faces the same vulnerability in metals supply chains.
The parallels with the energy crisis are unmistakable — and the stakes are just as high. Metals are the building blocks of modern life: they underpin critical infrastructure, defence supply chains, and the clean energy transition. Without them, there are no semiconductors, renewable energy, military equipment or artificial intelligence. Europe’s economic sovereignty, industrial competitiveness and security depend not only on access to minerals but crucially also on the ability to smelt and refine them into the metals.
Metals such as germanium, gallium, and antimony are crucial for defence and high-tech applications. Demand for germanium in the EU, for example, is expected to increase by 30 per cent over the next decade, according to estimates by consultancy Cru Group, yet the bloc depends entirely on imports for primary supply. These metals are only produced in small quantities, but they are vital, hard to replace and typically extracted as byproducts of base metals such as zinc, lead and aluminium.
This challenge is unfolding as the world economy is growing more fragmented and less globalised. The assumption that free markets always deliver optimal outcomes no longer holds. There is now a real “national security” value to these metals — one the private sector cannot price. We have already witnessed rare earths become weaponised in US-China tensions. The same risks exist for critical metals. China now controls much of the world’s refining capacity for key industrial metals and rare earths. It recognised early the strategic nature of metals and invested in refining and smelting capacity to secure supply. Europe, by contrast, has not built a new greenfield smelter since the 1990s, and nearly a third of its base metal smelters have been closed or curtailed in the last decade. The only metal with increased European production during this period is copper — largely driven by the Bor smelter in Serbia, controlled by a Chinese company.
The reasons for closures are clear. Stubbornly high energy costs combined with historically low treatment and refining charges mean virtually no smelter is profitable. We should know: Trafigura owns four zinc and lead smelters in Europe and three others in the US and Australia, operated by our Nyrstar subsidiary. Since 2019, through Nyrstar, we have invested more than €680mn in our European smelters, supporting more than 1,700 direct jobs and thousands of others in the economy. But there are limits to what companies can do alone when facing sustained losses.
These facilities and many others across Europe are strategic assets. They can be safeguarded through a combination of direct subsidies, competitive electricity pricing and lower grid connection fees. Such targeted interventions would not displace private capital but draw it in, boosting new investment.
Based on recent revamps, we estimate that between €75bn and €150bn would be required to fully modernise Europe’s smelting fleet. While that may sound like a lot, it needs some context. Metal-consuming industries in Europe, such as automotive manufacturing, defence, and infrastructure are huge. We estimate the cost of overhauling Europe’s entire smelting fleet could be offset by the equivalent of as little as one or two weeks of output from such industries.
To modernise existing smelters and increase recovery of critical byproducts such as gallium, germanium, and antimony, Europe should add new tools to its policy arsenal and better use existing ones: price floors; strategic offtake agreements; critical material stockpiles — and better use of trade restrictions.
Europe could also look to others: Australia and the US have acknowledged the importance of maintaining sovereign processing capacity. Once lost, it is incredibly difficult to recover. The recently signed US-Australia Critical Minerals and Rare Earths Framework shows how like-minded nations can accelerate efforts to build stronger, more resilient supply chains.
Europe has the industrial base, technical expertise, diplomatic relations and financial resources to secure its metal supply. The EU’s REPowerEU action plan successfully weaned the bloc off Russian gas, deploying financing and permitting reform at speed to build a more resilient and diversified energy system. We now need the same urgency on metals through the similar RESourceEU initiative. Europe needs to act quickly or accept permanent dependence on others for critical metals.