China remains the European Union’s leading supplier of several processed materials, while the Carbon Border Adjustment Mechanism (CBAM) applies to only selected industrial goods. Eurostat data for 2025 show the scale of EU reliance on Chinese supply in several mineral markets. The gap between that dependence and CBAM’s product coverage is relevant to both industrial sourcing and carbon regulation.
China accounted for 92% of EU magnesium imports by value in 2025, as well as 77% of gallium imports and 68% of ferro-tungsten imports. It supplied 43% of natural graphite imports and was also the EU’s leading supplier of rare-earth products.
CBAM Covers Selected Goods, Not Many Critical Minerals
Chinese aluminium imports, covered steel products and certain ferroalloys face CBAM requirements when they enter the EU market. Magnesium, gallium, graphite supplies, rare-earth products and ferro-tungsten are among the critical materials outside the mechanism’s current scope. CBAM therefore addresses only part of Europe’s dependence on Chinese processing capacity.
These materials support multiple industries. Aerospace and defence manufacturers use specialised metals and rare earths, while graphite is important for battery production. Magnesium, ferro-tungsten and other processed materials also serve steelmaking, electronics and renewable energy technologies, so supply-chain disruptions could affect several sectors at once.
Different CBAM Treatment for Chinese Producers
The mechanism places different requirements on Chinese producers according to the goods they send to the EU. An aluminium smelter supplying the European market must account for emissions associated with its covered products. Under the current framework, producers of magnesium metal, rare-earth oxides or natural graphite generally do not face the same direct carbon-border mechanism.
This distinction creates different incentives to cut emissions. For manufacturers exporting covered goods, reliable emissions reporting and lower carbon intensity can matter to their competitiveness in Europe. Producers of materials outside CBAM’s scope face different market pressures, although their products may be equally important to European industrial supply chains.
Europe’s dependence on China extends beyond the extraction of raw minerals. Processing capacity, refining expertise and established industrial networks give Chinese suppliers a strong position in markets where alternative sources may be limited. CBAM can influence the carbon performance of covered imports, but it does not automatically drive equivalent changes throughout the critical-minerals supply chain.
Raw-Material Diversification Requires Wider Industrial Measures
Carbon pricing cannot replace raw-material diversification. Extending CBAM to more products could change trade incentives, but would not immediately create new mines, processing plants or commercially viable substitute technologies. Alternative supply chains require investment, infrastructure, skilled labour, access to energy and long-term demand commitments.
Those requirements are particularly demanding for specialised minerals and processing operations, where it can take considerable time to establish competitive capacity. The Critical Raw Materials Act (CRMA) and related industrial policies therefore remain important parts of the EU’s strategy. International partnerships can help diversify sourcing, while recycling can reduce reliance on newly extracted materials.
Strategic stockpiles and procurement arrangements can also strengthen resilience against supply disruptions. These measures address a different issue from CBAM, which is designed to address emissions and carbon-leakage risks associated with covered imports. Raw-material policy, by contrast, must help European manufacturers obtain essential inputs from a broader range of suppliers; the approaches can complement one another, but neither fully replaces the other.
Proposed Downstream Extension Could Affect Industrial Goods
The EU’s evolving carbon-border framework is relevant to Chinese manufacturers beyond goods already covered. A proposed extension to certain downstream goods from 2028 could bring additional industrial equipment and fabricated products within CBAM’s scope. Any change would depend on the final scope and implementation of the proposal.
If implemented, the extension 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 relying on default emissions values. The proposed change would not, by itself, resolve Europe’s reliance on Chinese supplies of critical materials that remain outside CBAM.
Even so, the direction of EU policy gives Chinese producers an incentive to strengthen emissions monitoring and documentation where their products or downstream customers are exposed to the mechanism. The potential effect on trade would depend on the final design of the proposed extension.
Competition Also Depends on Processing and Supply Security
The broader strategic competition 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 reinforce its domestic industrial base.
CBAM changes competitive conditions for selected imports, particularly covered steel and aluminium products, but its reach remains limited in areas where European reliance on Chinese suppliers is especially pronounced. Europe’s policy challenge extends beyond whether to expand the carbon border to how climate measures align with investment, recycling, strategic procurement and diversified sourcing. Reducing emissions associated with covered imports will not necessarily reduce vulnerability to concentrated supplies of critical minerals without that broader industrial framework.
