This article is part of our special report The global race for raw materials.
Markets for raw materials have recovered from the 2008 financial crash, fuelled by the continued digital transformation of the economy and the rapid deployment of green technologies. Is the world on track for a repeat of the resource boom seen in the early 21st century?
The global fight for natural resources was nearing an all-time high when the European Commission first laid out an EU strategy for raw materials, back in 2008.
“A strong and unforeseen surge in demand” driven essentially by double-digit growth in China, had led to a tripling of metal prices between 2002 and 2008, the Commission said at the time.
China, the world’s de facto sole supplier of rare earth metals, took advantage of its monopolistic position to impose restrictions on exports, prompting Japan to start stockpiling in fear of a supply crunch.
At the European level, those concerns resulted in the establishment of a “raw materials diplomacy” to secure supplies from abroad – including legal action at the WTO when necessary – a push for resource-efficiency inside Europe, and the creation of a list of critical raw materials to monitor potential supply risks.
Those fears were quickly swept away by the financial crisis, which depressed the global economy for many years.
But ten years later, the fundamental economic trends that fuelled EU worries at the time are still there. If anything, those trends have intensified, driven by the continuous digitialisation of the economy and the transition to renewable energies.
“Irreplaceable” raw materials
“It’s already happening,” said Maroš Šefčovič, the European Commission’s vice-president for the Energy Union, when asked about fears that raw materials prices could start rising again.
“All the focus now in the European Commission is to reduce dependency on fossil fuels,” he told EURACTIV in an interview.
“This is why we are looking at access to raw materials with increased scrutiny,” he added, saying the objective was to avoid trading dependency on imported oil and gas with dependency on imported raw materials.
“I really think that, when it comes to the issue of dependency, we could end up in a situation where raw materials become the new oil,” he warned.
To illustrate his point, Šefčovič likes to produce one statistic about the materials necessary to produce a 3 megawatt wind turbine. Manufacturing one of those requires 335 tonnes of steel, 4.7 tonnes of copper, 1,200 tonnes of concrete, 3 tonnes of aluminium, 2 tonnes of rare earth elements as well as zinc, he says.
“For me that is really illustrative of the volume of raw materials you need for the green transition,” he told EURACTIV.
Critical raw materials “are irreplaceable in solar panels, wind turbines, electric vehicles, and energy-efficient lighting” which are essential for the energy transition, the European Commission said in its latest Report on Critical Raw Materials and the Circular Economy, published in January 2018.
Everyday consumer products in the telecoms sector are also highly exposed to raw materials price fluctuations. “A smartphone might contain up to 50 different metals” all of which provide essential properties to the final product, the EU executive remarked, pointing to the importance of critical raw materials for high-tech products.
And the majority of these primary raw materials are produced and supplied from non-European countries, the report pointed out:
Nowadays, industry people say supply risks are driven mainly by emerging demand for new products such as electric cars.
“Raw materials will be essential for manufacturing the products of the future. They form the basis of modern societies, our cities, digitalisation and the European energy transition,” said Roman Stiftner Secretary-General of the European Mineral Resources Confederation (EUMICON).
“Megatrends such as digitalisation and the decarbonisation of transport and production are resulting in new demand for raw materials, in terms of volume and of complexity,” EUMICON said in its raw materials charter, published earlier this year.
Other megatrends identified by EUMICON include increased wealth and global population growth. Global GDP is ten times higher than 50 years ago, and the world’s population has doubled. A further 3 billion people are expected to join the middle-class between 2010 and 2030, and all of them will want cars and smartphones.
Meanwhile, urbanisation, digitalisation, the low-carbon transition and the switch to electricity as the main source of energy for industry are further accelerating developments, it says.
“Electricity demand is rising, while increased production of wind and solar energy requires a greater quantity of a different mix of raw materials,” EUMICON pointed out, wondering whether the world has entered “a new age for metals and minerals”.
To be sure, the digital revolution that was already underway ten years ago has accelerated and branched out into new areas, creating excitement around things like robotics, smart cities, industry 4.0, electric vehicles, autonomous driving, and artificial intelligence, to name a few buzzwords.
On the manufacturing side, concepts have evolved. The European Commission’s resource-efficiency agenda of 2011 has morphed into a more ambitious circular economy strategy, which places recycling at the centre of attempts to close raw material loops and keep valuable resources inside Europe.
New risks, new solutions
However, recycling has its limits, even under the most optimistic scenarios. “The overall demand for raw materials is growing, and recycling alone cannot supply the market,” EUMICON said, citing aluminium as a case in point.
And “since recycling efforts will not be sufficient to feed the demand, supply of primary raw materials is irreplaceable,” it argues, calling for “new solutions” to establish “a future-proof raw materials policy”.
This includes exploiting Europe’s own geological deposits as well as securing access to raw materials on global markets to strengthen the future resilience of European industry.
But is Europe – and indeed the world – better equipped to deal with those global challenges today than it was ten years ago? From a technological point of view, maybe yes. But from a global trade perspective, definitely not.
Under President Trump, the United States has taken a hostile stance against Europe and China on trade, launching attacks on all fronts, ranging from steel to cars and food, raising the spectre of a new global trade war.
China itself has long pursued unilateral policies on access to raw materials, cutting deals with resource-rich African countries in return for cheap loans and infrastructure.
This makes the current trade environment more volatile than it was ten years ago, under a more accommodating Obama administration and a less assertive China.
“This time around, governments seem to be taking a more assertive, and in some cases, pre-emptive stance,” according to the Centre for European Policy Studies (CEPS), a think-tank.
“Witness, for example, China’s disputes on rare earth elements or President Trump’s Mineral Order at the end of 2017. This new attitude may pose new challenges for EU trade policy,” CEPS wrote in a policy paper published in February.
A future ‘Made in Europe’?
Faced with those challenges, Europe has also taken a more assertive stance, launching WTO disputes against Chinese export restrictions on raw materials such as graphite, cobalt, copper, lead and chromium.
In his latest State of the Union speech, Jean-Claude Juncker proposed a new ‘Africa-Europe Alliance’ that hopes to tap “the full potential of economic integration and trade,” with an objective to leverage up to €44 billion of investments into the region by 2020.
At home, the European Commission has targeted an increase in the recovery of key raw materials as part of its Circular Economy Strategy put forward in 2015, placing the emphasis on recycling and reuse with a view to “closing the loop” of product lifecycles. Supporting innovation in European recycling technologies is also part of that plan.
But EUMICON says technological solutions, although necessary, won’t go far enough to meet the challenges Europe is facing.
“A complete approach to sustainability requires us to consider economic, environmental and social sustainability together,” EUMICON said, stressing that “all three aspects need to be addressed with equal focus” in order to ensure a future that is “Made in Europe”.
What it boils down to is the importance of strengthening raw material value chains in Europe at a time when the international trade order is being challenged.
“The EU will need to develop a proper thinking how to put raw materials in the centre of its industry strategy, since we will be facing a new global race for raw materials in the future,” said Gilbert Rukschcio, managing partner at Pantarhei Advisors, a consulting firm based in Austria.
“Global megatrends such as digitalisation and the energy transition will also force Europe to act on this field,” Rukschcio said.