Europe’s, and especially Germany’s, industrial machine runs primarily on imported raw materials. A mix of limited domestic deposits and seemingly unlimited regulatory hurdles to exploit factually available resources, has created near-total dependence on foreign supplies for critical inputs like oil, gas, copper, lithium, rare earths, and more. These are essentials for cars, machines, electronics, and even the “green transition”. Recent escalations in the Middle East have amplified supply risks, pushed prices higher, and exposed the fragility of long global chains. Could this be the wake-up call for serious recycling?
Summary and key takeaways from today’s Weekly
– The circular economy, mainly known as recycling, has been propagated loudly, but unattractive economics held it back.
– A freshly-published report highlights the potential and the strategic necessities.
– As this topic has passed the stage of ideology and green-washing, it is time to consider it from an investment perspective.
Geopolitical strain, and, as a result, surging resource prices, are not what struggling economies with a high dependency on reliable and cheap commodity sourcing need.
It is no secret that the “old continent” is highly dependent on such imports.
Clearly, a tide lifts all boats. In other words, in good times, this issue is not pressing enough to implement any changes, no matter how much sense they make strategically.
But a low tide shows who’s naked.
Enter the long-propagated, but so far poorly-executed “Kreislaufwirtschaft” — German for circular economy — as a pragmatic counterweight, and an interesting investment topic arises.
If not now, when?
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Never let a Crisis go to Waste
Although broadly speaking it doesn’t feel like a full-blown crisis, yet — sectorial exceptions apply — there’s no denying the winds have started to blow from the wrong direction, and in an unpleasant strength.
I don’t know whether we ever had tailwinds, but now there are clear headwinds.
A joint study by the BDI (Bundesverband der Deutschen Industrie, Federation of German Industries) and Boston Consulting Group, titled “Wachstum, Wettbewerbsfähigkeit und Resilienz” (“Growth, Competitiveness, and Resilience”), discusses the topic of the circular economy in a freshly-published report (see here).
The timing of the publication could have been barely better.
No one will say it is a stupid idea to lower dependencies and instead to hold the destiny in one’s own hands.
The paper quantifies the upside of higher recycling activities through hard figures: Circular value creation could more than double from around 60 billion EUR annually today to up to 125 billion EUR by 2045, delivering cumulative gains of up to 880 billion EUR. That’s the equivalent of almost another GDP of Poland or Sweden and Finland combined (see here).
Admittedly, this is over a fairly long timeframe of 20 years.
Nonetheless, now seems to be the right time to finally get things seriously started. Better done than perfect, and better now than never.
The authors say, recycling and reuse could offset 20–40% of strategic raw material imports in key sectors.
In the past, the problem was often that, depending on the concrete resource, recycling was either not generating enough financial benefits for the required effort (upfront investments, implementations, operating costs) or it was not price-competitive at all, when commodity prices were low like in big parts of the 2010s until 2022, but also partly during 2024–2025.
Sometimes, first pressure needs to build to get things moving.
Why for example reuse plastics through an expensive, energy-intensive recycling mechanism of collection and processing, when oil for virgin plastics was dirt-cheap?
Although it is, of course, mentioned as a key benefit in the report, the circular economy isn’t purely about green ideology. It’s a cold supply-chain equation. And this is why it is worth discussing this topic, but also to scratch our heads about potential investment opportunities.
Below are charts of aluminum, steel, copper, and European natural gas over the last twelve months. All of them are trending up.
Despite the world economy performing rather poorly.
Real or expected shortages together with other disruptive factors like longer travel routes cause upside pressure. In consequence, higher commodity prices make recycled, so called secondary materials, more competitive.
But not only that.
Shorter domestic loops slash emissions, costs, and lead times while enhancing resilience.
This is the common-sense perspective — but there’s also regulatory tailwind.
The EU’s Critical Raw Materials Act (CRMA), in force since 2024, drives ambition with hard 2030 benchmarks: at least 10% of strategic raw materials from EU extraction (own production), 40% from processing, and 25% from recycling, alongside a cap of 65% reliance on any single third country.
The current estimated recycling figure is closer to just 10%.
Germany already excels in some areas.
For example through recovering over 50% of aluminum and significant steel scrap. But broader rates for high-tech critical materials lag. Nonetheless, this is clearly a good starting point.
With high commodity prices, the cost incentive seems to be in place.
However, scaling on a significantly higher level requires better collection, advanced sorting, and policy follow-through. Importantly, the BDI / BCG report stresses that circularity complements, rather than replaces, domestic mining and diversified imports.
This makes perfect sense for example for commodities like copper or lithium where demand has risen strongly, outpacing the available recycling potential.
That’s why mining could (and likely should) be part of the solution — assuming no technological disruptions or substitutions. Yet permitting delays and public resistance hinder projects like lithium and copper in Mid- and East-Germany’s Erzgebirge region or fracking in Northern parts of Germany to exploit available nat gas resources.
The latter could solve the supply issue for at least a decade, buying precious time to seriously reorganize supply chains. If one wanted to.
What does this mean for us as equity investors?
There are stocks with ties to this broader topic. However, publicly traded players illustrate the tensions and frictions.
Vermilion Energy (ISIN: CA9237251058, ticker: VET), a Canadian operator active in German natural gas since 2014, holds substantial acreage in the North German Basin and has pursued exploration amid Europe’s energy crunch. Vermilion is allowed to do a few test drills, but as it looks now, a serious leap forward is unrealistic, given regulatory friction.
Industry and company estimates (including from Vermilion Energy’s own assessments) suggest that meaningfully scaled domestic production could cover a material share of demand and save billions in premium-priced LNG imports annually. Yet Germany continues to rely heavily on expensive overseas supplies, while sitting on its own destiny.
Likewise on German soil, but on the metals side, Australian-listed small cap GreenX Metals (ISIN: AU0000198939, ticker: GRX) has advanced the Tannenberg copper-silver project in Hesse, targeting deposits in a jurisdiction with historic mining pedigree — but modern hurdles.
Whether any of these undertakings will ever advance, remains to be seen.
Which leads us back to the recycling part of the equation.
Across the Atlantic, Waste Management (ISIN: US94106L1098, ticker: WM) demonstrates recycling at industrial scale. As North America’s largest waste handler, it operates dozens of advanced material recovery facilities, turning trash into revenue streams through sorting, processing, and commodity sales — proving that integrated collection-to-reprocessing models thrive when volumes and prices align.
This doesn’t solve our European challenges, though.
Or maybe it does?
The technology layer is where it gets interesting. Not the digger is interesting, but the shovel, respectively the provider of the shovel.
Sophisticated sensor-based sorting and automated processing turn mixed waste into high-purity feedstock. These systems have matured over several decades. Today, the same core engineering principle handles plastics, metals, glasses, woods, cloths, and complex streams at scale.
Rising prices and regulatory mandates create a virtuous cycle.
Better economics for recyclers, stronger incentives for investments, and measurable reductions in import dependence sound like the winning formula. The EU’s Critical Raw Materials Act explicitly boosts collection and secondary production.
A brutal bear market in recycling equipment over recent years — driven by soft commodity prices and delayed projects — has slowed down adoption.
The new geopolitical landscape, though, sets up asymmetric recovery potential as conditions have flipped. Margins in up-cycles can surprise on the upside. When primary supply tightens, like we are seeing now, and secondary becomes premium, operators with installed bases, service revenue, and tech moats can thrive.
Europe’s industrial resilience hinges on closing the supply loops faster than geopolitics unravels them. The BDI / BCG vision, the EU’s CRMA targets, and real-world deployments by leaders in waste handling and sorting technology suggest the infrastructure exists.
Execution and capital allocation must catch up.
In an era of fragile supply chains and elevated resource prices, the circular bet isn’t optional anymore — it’s increasingly the rational one.
One established European technology leader stands out here for long-term investors.
Known primarily for its slightly different core business, this pick for all my paid members has a decent shot to successfully participate in the evident recycling push.
As a market leader with top-notch technology and decades-long expertise, its recently troubled recycling segment is ripe for a massive recovery.
Bolstered by a resilient, high-margin service market and global reach, the setup couldn’t be more compelling.
Details in this member-exclusive report —>
Conclusion
The circular economy, mainly known as recycling, has been propagated loudly, but unattractive economics held it back.
A freshly-published report highlights the potential and the strategic necessities.
As this topic has passed the stage of ideology and green-washing, it is time to consider it from an investment perspective.
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