Access to critical raw materials used in digital and clean technologies was labelled as “a strategic security question” in a European Green Deal unveiled on 11th December. A new industrial policy is expected to complete the picture next year.
Last month, when the new European Commission presented its latest thinking at the EU’s annual Raw Materials Week, the audience was full of concerned faces. There are plenty of methodologies available, but whether a raw material is critical to the EU economy is determined chiefly by the industries’ different material dependencies. And with domestic mining in the EU decreasing and import dependency increasing, industry players worry the realities are not understood by policymakers.
There are 27 materials on the EU’s “critical raw materials list,” including phosphorus, natural rubber, vanadium, and borate. All are considered both important to the EU economy and of worrying scarcity and therefore benefit from specific attention at the EU level to guarantee their sourcing and encourage their reuse. Accessing these raw materials is growing increasingly difficult however, as developing countries require more and more of them. The market supply is dwindling, and that’s bad news for places that are resource-poor, like Europe.
“Emerging markets like China are mining more and are creating greater demand for minerals and metals as their growing middle classes buy more household goods and cars and housing in these countries expands, and that is a good thing,” said Jane Korinek, an economist and trade policy analyst at the OECD.
“But the greater demand for goods inevitably creates greater demand for non-renewable raw materials like metals, minerals and petroleum,” she said.
In Brussels, the challenge is well understood by the European Commission.
Access to resources is “a strategic security question” the EU executive said in its European Green Deal, unveiled on 11th December). Ensuring the supply of critical raw materials used in clean technologies, digital, space and defence applications is “one of the pre-requisites to make this transition happen,” the Commission said. Critical raw materials “are irreplaceable in solar panels, wind turbines, electric vehicles, and energy-efficient lighting” which are essential for the energy transition, the EU executive said in its latest Report on Critical Raw Materials and the Circular Economy, published in January 2018. And as global demand for digital and green technologies continues to rise, ensuring frictionless trade in raw materials has become paramount for Europe.
“In some raw materials, Europe is resource-poor,” Korinek said. “But this is a challenge that is wider than Europe,” she added, saying some minerals and metals are produced only in a few countries.
In the case of at least five strategic minerals and metals, 95% or more of them is produced only in three countries, Korinek said.
“Such geographical concentration means that trade barriers, in particular barriers to the export of raw materials, can have very strong impacts on downstream industries for which these raw materials are inputs.”
As trade tensions increase between the US, Europe and China, concerns are growing over the availability of raw materials. There are calls to beef up the EU’s critical raw materials list and to start thinking about a return to mining in Europe.
“Since most economies today are highly integrated with one another, many industries rely on imported materials and parts in their production processes,” said Korinek.
For the time being, countries have not looked to restrict their exports, she said. But should they start doing so, “it could severely disrupt certain strategic global supply chains,” she warned.
“Perceptions of uncertainty of supply of minerals can incentivise some countries to open mines that were previously considered unprofitable. If trade tensions continue and countries wish to guard against supply risks, they may invest more heavily in extractive industries.”
Mining at home
The ability for Europe to increase its mining activity is limited, however. Many materials are just not available here, and some that are have already been mined out. But the EU suffers from a lack of information about which materials are available for mining, and industry players are trying to convince the Commission to increase raw material tracking.
“The Commission realises that at this moment in time we don’t have any more expertise for the mining industry,” said Aurelio Braconi, senior raw materials manager at European steel industry association Eurofer.
“They’ve started to set up a database and information exchanges among all the different geological services in the member states. That’s a good thing, because mapping for the mining industry is good, because then you know exactly the places where you can have resources at a concentration that make mining economically feasible.”
An increase in data could help EU countries increase mining for the materials deemed critical – particularly in concentrations that would ensure that mining them is profitable. But Braconi is concerned that instead of expanding the raw materials list, the Commission may shrink it next year. Some materials critical for the making of steel such as coking coal, may be removed soon, even though the Commission admits it is a “borderline” case.
The increase in raw materials monitoring isn’t just meant to benefit supply certainty for Europe’s companies. The intention is also to help companies and consumers ensure that these raw materials were sourced sustainably and responsibly. At Raw Materials Week last month, the European Commission launched an online portal called Due Diligence Ready!, which will provide businesses with guidance on how to check the sources of the metals and minerals entering their supply chains. It will help them ensure that their use of raw materials respects human rights while improving transparency and accountability across their value chains.
“Today, market demand for responsibly sourced raw materials is growing,” said former EU industry commissioner Elżbieta Bieńkowska while unveiling the system.
“These materials are essential to new business sectors and clean technologies like high-power batteries, and businesses should ensure that each step in the value chain is carried out in a transparent, responsible and sustainable way.”
The OECD has launched a similar scheme, called the Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-affected and High-risk areas.
Alternatives, reuse and recycling
Of courser, another way to avoid this import dependency is to start using alternative materials. Companies are looking into this, but the possibilities are at the moment limited.
“Often, these types of raw materials cannot be substituted, at least not in the short-term, and not without investing in costly research and development to find new or alternate technologies that use more readily-available raw materials,” said Korinek.
She says the greater possibilities in the short-term lie in increased reuse and recycling. Braconi says the steel sector is looking to greatly increase its use of recycled scrap in order to insulate itself from the volatile import market dynamics. There are many reasons for the EU to be concerned about its sourcing of raw materials. Thierry Breton, the EU’s new industry commissioner who took office on 1 December, has placed a strong focus on European industrial sovereignty and emphasising the industrial pillar of the European Green Deal, to be unveiled. In March, the Commission will adopt a new EU industrial strategy that is likely to revise the critical raw materials strategy. Over the coming months, concerned segments of industry in Europe will be working to convince him that the raw material situation needs to be tackled with urgency.