China’s dominance in processed raw materials highlights a gap in the European Union’s Carbon Border Adjustment Mechanism (CBAM), which covers selected industrial goods but excludes many strategically important minerals. The disparity reflects Europe’s challenge of cutting emissions while securing materials essential to its industrial base. Eurostat data for 2025 show the scale of the EU’s reliance on Chinese supplies.
CBAM covers only part of EU dependence on China
Chinese aluminium products, covered steel products and certain ferroalloys face CBAM requirements when imported into the EU. Magnesium, gallium, natural graphite, rare-earth products and ferro-tungsten are among the critical materials that remain outside the mechanism. As a result, the carbon-border framework addresses only part of Europe’s dependence on China’s processing capacity.
In 2025, China supplied 92% of EU magnesium imports by value, as well as 77% of gallium imports, 68% of ferro-tungsten imports and 43% of natural graphite imports, according to Eurostat. China was also the EU’s leading supplier of rare-earth products. These materials serve multiple industries: aerospace and defence rely on specialised metals and rare earths, while graphite is important for battery production.
Magnesium, ferro-tungsten and other processed materials also support steelmaking, electronics and renewable energy technologies. Disruptions to these supply chains could therefore affect several sectors at once. Europe’s exposure extends beyond mineral extraction to processing capacity, refining expertise and established industrial networks, where alternative sources may be limited.
Different CBAM requirements for Chinese producers
CBAM’s current structure imposes different requirements on Chinese producers according to the goods they export to the EU. An aluminium smelter supplying the European market must account for emissions associated with its covered products. Producers of magnesium metal, rare-earth oxides or natural graphite generally do not face the same direct carbon-border mechanism under the current framework.
This distinction creates different incentives to reduce emissions. For manufacturers exporting covered goods, reliable emissions reporting and lower carbon intensity can be important to maintaining competitiveness in Europe. Producers of materials outside CBAM’s scope face different market pressures, even when their products are equally important to European industrial supply chains.
CBAM can influence the carbon performance of covered imports, but it does not automatically encourage equivalent changes throughout the critical-minerals supply chain. China’s established processing networks and refining expertise reinforce its position in markets where alternative suppliers may be scarce. Europe’s reliance on Chinese suppliers therefore reaches beyond the products currently covered by the mechanism.
Raw-material security requires separate measures
For the EU, carbon pricing cannot replace raw-material diversification. Extending CBAM to more products could change trade incentives, but it would not immediately establish new mines or processing plants, or create commercially viable substitute technologies. Developing alternative supply chains also requires investment, infrastructure, skilled labour, access to energy and long-term demand commitments.
Those requirements are particularly demanding for specialised minerals and processing operations, where building competitive capacity can take considerable time. The Critical Raw Materials Act (CRMA) and related industrial policies remain important parts of Europe’s strategy. International partnerships can diversify sourcing, while recycling can reduce reliance on newly extracted materials.
Strategic stockpiles and procurement arrangements can also strengthen resilience to supply disruptions. These measures address a different challenge from CBAM: the carbon-border mechanism targets emissions and carbon-leakage risks linked to covered imports, while raw-material policy must help European manufacturers secure essential inputs from a broader supplier base. The approaches can complement each other, but neither can fully replace the other.
Proposed downstream extension could affect industrial trade
Europe’s evolving carbon-border framework also matters to Chinese manufacturers beyond the products already covered. A proposed extension to certain downstream goods from 2028 could bring additional industrial equipment and fabricated products within CBAM’s scope. If implemented, it could make the carbon intensity of steel and aluminium used in goods manufactured for the EU more important.
Suppliers with reliable emissions data and demonstrably lower-carbon inputs could be better positioned to meet requirements than competitors using default emissions values. The potential effect would depend on the final scope and implementation of the proposed extension. It would not, by itself, resolve Europe’s reliance on Chinese supplies of critical materials that remain outside CBAM.
For Chinese producers, the direction of EU policy nevertheless creates an incentive to strengthen emissions monitoring and documentation where their products or downstream customers are exposed to the mechanism. The wider strategic contest between China and Europe is increasingly shaped by carbon policy, processing capacity and supply-chain security. China’s position draws partly on the depth of its processing industry and its role in supplying materials used in advanced manufacturing.
Europe is seeking to combine carbon pricing with efforts to develop alternative sources and strengthen its domestic industrial base. CBAM changes competitive conditions for selected imports, particularly covered steel and aluminium products, but its influence remains limited where European dependence on Chinese suppliers is especially pronounced. The policy challenge is how to align climate measures with investment, recycling, strategic procurement and diversified sourcing; reducing emissions from covered imports will not necessarily reduce vulnerability to concentrated critical-mineral supplies.