The Critical Raw Materials Act (CRMA) of Europe, which was finally approved in March, does not include any provisions discriminating against products from overseas, but the Korea Automobile Research Institute (KARI) has published a report stating that industries and companies expected to be indirectly affected need to prepare long-term plans for supply chain diversification and collecting and managing raw material information.

Lim Hyeon-jin, a senior researcher at Hanja Industrial Analysis Lab, said in Vol. 134 of an industrial analysis titled 'Main contents and response directions of the EU CRMA' that the battery and electric vehicle industries are highly dependent on China in terms of procurement of strategic raw materials, so they need to recognize the need for supply chain diversification and collection and management of raw material information and prepare in advance. In addition, it is necessary to examine the impact of the CRMA in conjunction with other laws such as the EU Battery Regulation.

In March, the European Council gave final approval to the CRMA, which aims to strengthen supply chains for key raw materials and reduce reliance on third countries.

The CRMA, which was finally approved by the European Council in March, aims to reduce dependence on specific countries and strengthen supply chains within the region, and presents detailed objectives and strategies related to strategic raw materials to achieve these goals.

The EU has developed a framework for selecting critical raw materials and strategic raw materials to strengthen supply chains and to target raw materials. The concept of (materials) was introduced.

Among a total of 34 key raw materials, 17 raw materials were selected as strategic raw materials, and lithium, cobalt, nickel, and graphite, which are used in the production of electric vehicle batteries and fuel cells, were included as strategic raw materials.

▲List of core and strategic raw materials (Image source: Korea Automobile Research Institute Industrial Analysis Vol. 134)

Since 2011, the EU has been designating key raw materials with high economic importance and supply risks every three years to analyze supply chain risks, and through CRMA, it has additionally introduced the concept of strategic raw materials with high strategic importance, potential for future demand growth, and difficulty in expanding production.

The main objective of the CRMA is to protect the EU's economic and strategic autonomy by establishing sustainable supply chains for selected raw materials and reducing dependence on specific countries.

Senior Researcher Lim Hyeon-jin emphasized that since CRMA can affect companies manufacturing batteries and parts for electric vehicles, it is necessary to establish long-term plans for supply chain diversification and collecting and managing information on permanent magnets and raw materials used in products.

The CRMA does not specify any discrimination provisions against products from outside the EU, and sets targets based on the EU's total consumption of strategic raw materials, so the direct impact on individual companies and products is expected to be limited.

However, it cannot be ruled out that there may be actual regulations as specific implementation plans and policies based on future bills are established.

For example, CRMA is each It is necessary to monitor related policy trends as it stipulates that member states shall implement incentive programs to promote technological advancements in recycling of raw materials and reuse of key raw materials within two years from the date of entry into force of the law.

In particular, the processing and refining processes of raw materials used in the battery and electric vehicle industries are highly dependent on China, so there is a possibility that they will become key policy targets when designing detailed systems and programs based on the CRMA. Therefore, the import regions of raw materials used in each value chain of related items should be checked in advance.

▲Top 3 Mining and Refining Countries for Battery Core Raw Materials in 2022 (Image Source: Korea Automobile Research Institute Industry Analysis Vol. 134)

The same applies to examining the impact of CRMA in conjunction with other legislation, such as the EU Battery Regulation.

The CRMA only sets a target of having at least 25% of on-shore recycling capacity and must specify a list of wastes requiring recycling of strategic raw materials by January 2027 and the proportion of strategic raw materials recycled for each waste type.

In conjunction with the EU Battery Regulation, which has stipulated minimum recycling rates for battery raw materials since February, it is necessary to predict the recycling target for strategic raw materials within the region and for related product companies to prepare to secure recycled raw materials within the region.

The EU battery law's minimum recycling rates will be 16% for cobalt, 6% for lithium and 6% for nickel from 2031, with the standards set to increase in 2036.

Also, the battery law states that electric vehicle batteries are carbonSince it has been designated as a mandatory subject for measurement and reporting of environmental footprints, it is highly likely that CRMA's environmental footprint assessment and information provision obligations will be imposed on electric vehicle batteries and parts in the future.

Information disclosure and regulations related to environmental footprints, permanent magnets, etc. are expected to take effect at least three years later, so it seems necessary to continuously monitor legislative trends in implementation and delegated regulations to establish long-term strategies such as securing a supply chain for renewable raw materials.

Meanwhile, CRMA is similar to the US IRA in terms of its purpose of reducing dependence on specific countries and strengthening the supply chain within the region, but it is different in that it does not specify preferential treatment for products within the region or disadvantages for products from third countries or individual companies.

CRMA presents specific goals and strategies for establishing a foundation to achieve its goals, including building a resilient supply chain, monitoring and managing supply chain risks, and strengthening the circularity and sustainability of raw materials.

The main contents are as follows: by 2030, the EU will mine at least 10% of its annual consumption of strategic raw materials within the EU; process at least 40% within the EU; build the capacity to produce at least 25% through recycling within the EU and expand the recycling rate; and set a target of not exceeding 65% of the EU's annual consumption of imports from specific non-EU countries.

Among these, the recycling-related target was agreed to be increased by a relatively large margin compared to the 15% presented in the CRMA draft in March last year.