EU starts screening raw materials ‘critical list’

An expert group set up by the European Commission has begun screening a list of thirty-nine "potentially critical" raw materials whose availability to industry could come under threat as global competition for natural resources intensifies, EurActiv has learned.

A preliminary list of twenty raw materials considered to be potentially critical for the EU economy, published by the Commission a year ago, has been expanded to include nineteen new substances.

A first batch of raw materials – cobalt, lithium and rare earths – was examined by the expert group during its first meeting in November, with the objective of testing the Commission's proposed methodology on the raw materials' "criticality", EurActiv has learned.

"For example, a given raw material may be used in 40% by the automotive sector and 30% by the aerospace sector," said an EU official, speaking on condition of anonymity because the methodology is still being adjusted. "And so we can utilise these percentages to aggregate the economic importance of these raw materials for the sectors that use them."

"The economic importance will be determined either by the employment or the added value of the sector," the official said.

EU industries, and particularly those active in telecoms, aerospace and other hi-tech sectors, are facing fierce competition for natural resources from emerging economies, the Commission pointed out last year, outlining its draft raw materials strategy.

High-tech materials are increasingly at the basis of innovative "green techs", associated with renewable energy and reduction of greenhouse gases, it pointed out, saying Europe should seek ways of securing supplies or risk running short.

Those considered as "potentially critical" for 'high tech' sectors include niobium, platinum and titanium, the EU executive said in its preliminary assessment (see annex of Commission's raw materials initiative).

The new strategy, to be fully fleshed out next year, should aim to lower the consumption of primary natural resources by increasing resource efficiency and recycling, EU industry ministers agreed after a meeting in May (EurActiv 04/06/09).

Three types of risk

The expert group put together by the Commission has already identified three types of risks:

• Import risk, where raw materials are imported from a politically instable region or from a country where the market economy does not work. "That is relatively easy to do as the World Bank has put together governance indexes which measure the political and economic stability index of countries," the EU official explained.   
• Production risk within the EU, with potential problems such as land access. "If we are in a country for example where the population density is very high, where urbanisation is very high, obviously access will be weak," the EU official explained.
• Environmental risk, based on indicators such as air or soil pollution, where the impact of raw materials use is measured from an environmental point of view. "This is innovative compared to other studies," the EU official said. "We have just launched a life-cycle analysis to determine what the environmental impact is for each raw material in terms of exploitation, use, treatment, recycling etc., for air or soil pollution as well as emissions of greenhouse gases."

The three types of indicators are then aggregated to determine risk, but this is where things get "a bit more complicated," the EU official said.

"The aggregation for the import risk versus domestic production risk is rather easy because you only need to weigh the relative importance of imports versus domestic production for each raw material," the official said. "However, on the aggregation for environmental and other risks, we had to take 50%. I have to admit this is arbitrary but for the moment, we couldn't do better."

A key factor in assessing risk will be whether or not the raw material can be easily substituted. "If it can be substituted in full by another raw material, in this case of course the risk is easy to avoid," the EU official explained.

Concern over Chinese rare earths

Of particular worry to Europeans are rare earths, collections of metals and elements found in a wide range of gadgets and consumer goods, including batteries used in electric cars. 

Among the rare earths likely to be most affected is neodymium, shortages of which are expected. Neodymium is the key component of an alloy used to make the high-power, lightweight magnets for electric motors of hybrid cars, such as the Prius, Honda Insight and Ford Focus, as well as in generators for wind turbines, Reuters reported.

The problem is that 95% of global production and about 60% of consumption currently originate from China, according to the US geological survey. "We have already identified access difficulties, with China obviously being one of the countries where we have identified access difficulties," the official said.

Some rare earths can be found in Europe, the official added, saying geological information is "relatively precise" on this point. "So this is very important to know because if we find that rare earths are critical and that there is an import risk from China, then there is a first recommendation that goes without saying: let us try to exploit these earths in Europe if that is possible."

However, they may be located close to urban areas, complicating their exploitation by the mining industry. Moreover, there is no comprehensive geological map of Europe available yet, making predictions more difficult.

Chinese media reported in September that Beijing would start applying quotas on exports of rare earths and other exotic metals of which it is the only major supplier, citing environmental reasons.

The United States and European Union filed a complaint with the World Trade Organisation on 23 June, accusing Beijing of unfairly favouring its steel, chemicals and other industries by restricting access to nine types of key raw materials.

Other major suppliers of rare earths include the United States, but it has become dependent on Chinese imports because production prices there are lower, according to the US geological survey.

Next Steps

• May 2010: Commission expected to table report on critical raw materials.
• June 2010: Report due to be adopted and presented under Spanish EU Presidency.