Endless Raw Materials

Germany produces and exports more than almost any other country. Machinery, vehicles, electronic systems, chemicals – German industrial goods are present in markets around the world. However, this strength has a structural downside: To produce these goods, the German economy requires enormous quantities of raw materials that it possesses in virtually no quantities itself. Oil, gas, metals, rare earths, and many other materials are imported, often from a handful of countries in politically unstable regions, at prices subject to significant fluctuations.

These are not new findings. But the geopolitical upheavals of recent years give them a new sense of urgency. The German economy relies on imports for over 90 percent of its critical raw materials, and the concentration on just a few supplier countries is alarming. Of 48 raw materials examined, 23 showed a high to very high concentration of imports in 2023. This dependence has recently intensified in light of the major transformations in the energy, mobility, and digitalization sectors, which require many critical resources.

Anyone who discusses this situation solely in terms of climate policy or sustainability rhetoric is missing the point. Something more fundamental is at stake: Germany’s ability to continue producing, exporting, and maintaining economic sovereignty in the future.  It hinges on the strategic question of how a country with few natural resources can maintain and expand its industrial base in the midst of an increasingly resource-driven global market. A large part of the answer lies in the circular economy.

Resources as a source of uncertainty

Any company or economy that consumes raw materials and then disposes of them creates a twofold dependency: on primary suppliers at the beginning of the value chain and on the disposal infrastructure at its end. The classic linear model – procure raw materials, manufacture a product, use the product, dispose of the product – worked in a world where raw materials were cheap and abundant. That world no longer exists.

Instead, critical materials are becoming scarce, while demand is rising due to digitalization, the mobility transition, and the energy transition. In 2023, 68 percent of Germany’s energy needs were met by imports. For specific industrial minerals, the situation is even more concentrated: The EU sources more than 90 percent of its rare earths and magnesium from China, and for lithium, dependence on a few supplier countries is significant. Import dependency for metal ores and concentrates, which are necessary for production in key industries, is nearly 100 percent.

This is precisely where the circular economy model comes in. It aims not to dispose of materials after a single use, but to keep them in the system – through repair, reuse, remanufacturing, and ultimately recycling. Every kilogram of steel, aluminum, or copper recovered from a waste product and fed back into the production process is a kilogram that does not need to be imported. This simple logic holds economic potential that is still underestimated in public debate. Not only does it increase value creation in Germany, but it also creates jobs here.

From goods to services

The circular economy model changes not only production processes but also the fundamental logic of economic activity. One of the most structurally interesting concepts is the Product-as-a-Service model: Instead of selling a product, a company offers its use as a service. The manufacturer remains the owner of the product and thus has a direct economic interest in ensuring that it lasts as long as possible, requires minimal maintenance during operation, and is efficiently recycled or remanufactured at the end of its life.

This model is no longer a vision of the future. Michelin offers tires as a service, based on vehicle mileage. Manufacturers of industrial lighting are increasingly selling light rather than lamps. In the machine tool industry, concepts are emerging where it is not the machine itself but the generated processing capacity that is billed. This fundamentally changes the incentive structure: Durability and repairability are no longer merely requirements imposed by an external regulator but economic necessities for the manufacturer.

For German mechanical engineering and capital goods companies, this opens up strategic opportunities in international markets. In countries that are still in the industrialization phase and have not yet established a recycling infrastructure, German companies can use circular economy-based product-service systems to build a quality and reliability advantage that is virtually unassailable at the competitors’ price level.

Already today, more than half of all German companies are grappling with the question of how to integrate elements of the circular economy into their business models. Companies hope this will lead to savings in material costs as well as increased independence and resilience in their supply chains. The challenge lies in pursuing this path before market conditions or regulation force them to do so. After all, whoever is the first to scale robust circular economy business models sets the standards that others will follow. This is where researchers at Fraunhofer IPK come in, for example with the online tool EcoBoost, where companies enter simple metrics and receive customized, prioritized suggestions for suitable circular economy approaches that enhance their respective business models. 

Research for the circular economy

The transition to a circular economy is not a foregone conclusion. It requires technological developments that are only just beginning to emerge today. At PTZ Berlin, such developments are being significantly advanced across various research fields. A central focus is the AI-supported recognition and sorting of materials and components.
 
Electronic waste contains valuable raw materials, but their recovery often fails due to the labor-intensive manual disassembly and sorting involved. With the help of image processing systems and machine learning, components can be automatically identified, classified, and separated for further processing. In several projects focused on recovering critical raw materials, such as from electrical appliances or in automotive recycling, researchers at Fraunhofer IPK have already validated this approach.

Closely linked to this is the digitization of product history. A component that carries a digital record of its entire life cycle – manufacturer, material composition, usage intensity, maintenance history – can be processed or recycled much more effectively at the end of its life. The digital product passport, which the EU will mandate for numerous product categories under the Ecodesign Regulation, is the tool for this. At Fraunhofer IPK, the methods and tools are being developed that enable companies to make their products DPP-compatible. For example, a recently launched funding project on the digital product passport for small businesses is investigating how small and medium-sized enterprises that have not yet had access to such information infrastructures can be integrated into digital circular systems.

Another field of research is remanufacturing, i. e., the industrial refurbishment of used products to like-new condition. The technological challenges are considerable: Used components exhibit signs of wear, material fatigue, and surface changes that must be precisely diagnosed and remedied. At PTZ Berlin, non-destructive testing methods, adaptive machining strategies, and semi-automated quality assurance systems are being developed to make remanufacturing scalable.

Now is the time to act

In December 2024, the Federal Cabinet adopted the National Circular Economy Strategy. It provides a framework and identifies key areas for action. Whether this framework will provide a genuine impetus for transformation depends on how consistently it is backed by concrete instruments and whether the political conditions are right for the necessary investments.

Germany has many prerequisites for promoting circularity: an excellent recycling sector and excellent cutting-edge research. However, over the past two decades, Germany has lost its former pioneering position and is lagging behind in a European comparison. In a field where technological standards and infrastructures are emerging that will shape the industry for decades to come, this is a management position that becomes more costly to regain the longer one waits.

For companies that act now, a unique opportunity presents itself: Those who take the lead will set standards for product design, take-back logistics, and quality assurance of recycled materials. This is a competitive advantage that can be defended.

In research, the goal is to develop technological solutions that not only work in the lab but are also scalable in the practical operations of small and medium-sized enterprises. Science must provide methods that enable companies to analyze and transform their business models for circularity. And research in the field of business management, in particular, must be able to act as an honest mediator between stakeholders who must enter into new forms of cooperation to get circular systems up and running.

For our researchers, the circular economy is not merely a sustainability issue in the narrow sense, but simultaneously a matter of production technology, management, and ultimately innovation. The question is how Germany can preserve and expand its industrial strength under changing resource conditions. The raw materials for Germany’s industrial future are not stored in distant mines. They are already contained in the products we use today. It is up to us to recover them.