PARIS - Europe needs a system to set prices for critical minerals needed for the energy transition that is not dependent on China, which dominates much of the global sector, the head of an EU-funded group said.

Oversupply and weak prices of materials such as lithium, cobalt and rare earths are dampening cash flows of Western start-ups, making it difficult to compete with China, companies have said.

"Europe should have a critical materials platform that has a price-building mechanism that reflects the supply and demand situation in Europe," Bernd Schaefer, CEO of EIT RawMaterials, told Reuters.

"Sometimes an administrative decision in China can turn the pricing needle, eroding all assumptions that somebody has made for investing in raw materials. This must change," he said in an interview on the sidelines of last week's World Materials Forum in Paris.

Schaefer also called for an exploration fund to boost mining of critical minerals in Europe.

"This should not be just a couple of million (euros), it should be a billion, it must be a big number."

EIT RawMaterials leads an alliance of more than 300 companies, academics and others involved in the sector, helping to implement an EU plan to provide raw materials needed to meet the bloc's target of net zero greenhouse gas emissions by 2050.

The EU Critical Raw Materials Act, which entered into force in May, sets targets for the bloc to mine, recycle and process minerals including lithium and copper by 2030.

There was a risk that political uncertainty could delay taking the next steps to meet those targets, Schaefer said.

"This discussion is in limbo. We are in a period of transition within the Commission and within Europe," he said, referring to recent elections in France and for the European Parliament plus political instability in Germany.

"We might be losing time, but we cannot afford to lose time."

As a neutral, non-political agency, EIT RawMaterials could play a key role in helping to drive the changes that are needed, Schaefer added.