While they claim to want to get rid of China, in reality, from military expansion to artificial intelligence development, and even energy transformation, the UK has realized that the supply chain for key minerals cannot be bypassed without China.
On November 5 local time, the UK Parliament's House of Commons Committee on Business, Innovation, Science and Trade released a report on critical mineral supply chains, highlighting how the UK is ‘dangerously dependent’ on China in this area. The committee warned that both defense, artificial intelligence, and net-zero emissions targets are at risk, and urged the government to take urgent action.
The chairman of this commission, Liam Byrne, complained that China's initial advantage in rare earth supplies was applied 16 years ago and since then has impacted the United Kingdom.
Bourne claims that without a reliable supply of key minerals, the UK cannot rearm its military, develop artificial intelligence, or achieve net-zero emissions targets.
What gives British lawmakers headaches is that China's advantages lie far beyond mineral extraction.
The report indicates that the real bottleneck in the supply chain lies in the processing stage. China plays a leading role in the refining of seven types of minerals, including lithium and rare earths. These materials are widely used in electric vehicles, military aircraft, and other high-tech products.
As the UK intensifies its development of emerging industries and expands its military capabilities, its demand for minerals will continue to rise rapidly. Members of Parliament have learned that by 2030, the UK's demand for lithium could increase to 45 times the current level, and the demand for rare earth materials used in military aircraft and other fields could increase to 16 times the current level.
In the face of this situation, British MPs have proposed a series of plans to diversify the supply chain. These include establishing financing mechanisms for critical minerals, using grants, equity investments, and loans to support local mining, refining, and recycling projects. Additionally, they are working with the G7 countries, European partners, and the Indo-Pacific partners to develop alternative supply chains.
However, trying to avoid China would likely come at a significant cost.
The International Energy Agency's "Global Critical Minerals Outlook" released this year indicates that the capital cost for building mineral refining projects outside major supply countries is typically 20% to 150% higher, and the operating costs are on average about 50% higher. Technical, talent, infrastructure, and regulatory barriers also make it difficult for new projects to be implemented quickly.
What's more troublesome is that even if new mines are found, it doesn't mean a complete supply chain has been established. The International Energy Agency has found that global investment in diversification of key minerals still favors mining, with processing and downstream manufacturing capabilities being significantly inadequate. Take rare earths for example; by 2035, the planned production capacity of magnets outside China is only about one-third of the expected mine output.
While British MPs complain about excessive reliance on China, another report released by the same committee on November 2 criticized that the British government’s policy towards China lacks consistency, and even seems to be moving in a piece-by-piece manner.
The report acknowledges that low prices and continuously improving quality of Chinese goods help to reduce the cost-of-living pressures for British consumers. British companies also hope to seize opportunities through China’s technological innovation. However, the government’s inconsistent actions make it difficult for companies to develop long-term plans.
Bourne warned that the UK must decide on its own how to handle its relations with China; otherwise, it may have to let Washington or Beijing make decisions for it.
