Resilience and sovereignty of German industry

Global raw material deposits are not in balance. A few countries have a lot, others do not. It is not just the mere deposits, but also the processing of raw materials and the manufacture of primary products that is often concentrated in just a few countries.

The Netzwerk Zukunft der Industrie e.V. commissioned Prognos to analyse the industrial resilience and strategic sovereignty of Germany as an industrialised country. The aim is to analyse existing dependencies using specific examples and to develop recommendations for action for sustainable value creation - based on a sustainable supply of raw materials and taking into account global inputs.

The first interim results were presented at the industry conference on 26 November 2024.

First results: High dependencies and insecure supply chains

Global supply relationships are becoming increasingly crisis-prone. External events and geopolitical tensions jeopardise supply. The pursuit of dominance by individual global players can lead to targeted shortages.

At the same time, the digital and sustainable transformation is increasing demand for rare raw materials or primary products, most of which are mined or processed in authoritarian regimes. This poses a considerable challenge for industry in a location with few raw materials such as Germany. Demand and competition for these resources are intensifying worldwide.

The interim results of our analysis for the Network of German Industry show that:

German industry is heavily dependent on raw materials and intermediate products from other countries. This vulnerability is particularly evident when it comes to implementing the energy transition and shaping climate change - for example in e-mobility or the supply of wind power.

Authoritarian regimes can use this to strengthen their market position. The licensing of raw material exports is a first step towards regulating export volumes. First and foremost: China. The People's Republic uses its strong position in raw materials and processing expertise to create targeted dependencies. The examples of solar panels, wind power and electromobility show: in combination with means such as price dumping or overproduction, the aim is to achieve global domination of individual markets. 

Example: E-mobility

The drive batteries are at the heart of the electric car, which is why the automotive and supplier industry has been investing in the expansion of battery cell production for years. The German automotive industry is currently highly dependent on China for the import of finished battery cells along the entire value chain:

• China has the largest production capacity for battery cells, with a market share of around 77 per cent of global battery sales.
• China accounts for 71 per cent of the cathode material in current lithium-ion battery cells.
• As much as 91 per cent of the anode material.

Dependence in wind power is similarly high. Previous approaches such as the German raw materials strategy or the EU battery regulation are not enough to curb China's dominance. Even the development of our own production capacities is dependent on inputs from China at almost all stages of the value chain. A clear overall European strategy with effective measures is lacking here.

A European response to China's dominance is needed

The analyses and discussions conducted by Prognos with industry experts have produced the following initial messages:

• The challenges posed by the quest for market dominance are too great to be tackled by individual companies or nation states; Germany cannot win this power game on its own: European solutions are needed.
• Industrial and technology policy in Europe must necessarily define priorities in which they want to assert their sovereignty of action. In the medium term, this means concentrating on individual fields, technologies and products and building up expertise in the processing of raw materials.
• In the long term, this must lead to a new self-image: If we want to maintain Europe as an industrial location, appropriate framework conditions must be shaped and investments promoted (fair CO2 pricing, reduction of energy costs, etc.).
• Procurement must become more diversified. Greater consideration should also be given to the reliability and predictability of partners' actions.
• The options for domestic raw material extraction should also be examined. This should be orientated towards the guidelines for sustainable management in order to gain an advantage over countries that practise overexploitation.
• European companies should also cooperate closely in order to better utilise their market power together.

Our approach

The study aims to examine the industry's resilience and sovereignty of action using specific, in-depth analyses. The focus is on supply chains, as this aspect of resilience is particularly susceptible to disruption. Not only raw materials are analysed, but also preliminary products.

Prognos analyses the supply chains in four central sectors that are particularly important for Germany and Europe:

• Renewable energies - wind turbines
• Electromobility - Batteries for electric drives
• Electronics - Microchips
• Defence - Titanium metals

The specifics of raw material, input and product procurement are analysed, as well as risks and requirements and the potential for shaping employment and structural development at different levels of action. The team uses the following methods to do this:

• Literature research
• Focus groups with technical and industry experts
• Specialist discussions
• Analyses of economic and trade data

Links and downloads

More information about the network (website, german)

The full study is expected to be published in the first quarter of 2025.

Project team: Michael Astor, Tim Bichlmeier, Dr. Eva Dantas, Jakobus Kai Jaspersen, Leonard Krampe, Paul Möhlmann, Bianca Neumann, Dr. Andreas Sachs, Helena Seide, Johann Weiss

Last update: 26.11.2024