Florenz MEP: Raw materials ‘much bigger problem’ than climate change

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This article is part of our special report Resource efficiency: towards a circular economy.

A special group was set in the European Parliament up last month to collect first hand information on the issues affecting raw material prices and availability. The group's chair, German MEP Karl-Heinz Florenz (European People's Party), told EURACTIV about his objectives.

Karl-Heinz Florenz is a German member of the European Parliament (European People's Party).

To read a shortened version of this interview, please click here

Briefly, how would you assess the European Commission's raw materials policy?

In 2008 with discussions on climate change, I realised that climate change is just the tip of the iceberg and that a much bigger problem – raw materials – lies under the water. I personally believe that we will be able to solve the issue of CO2 in 10-15-20-30 years, but I'm not sure whether we have enough raw materials to build the very highly developed technologies we need to combat climate change. For one electric car, for example, you need six computers.

So we have realised that we need to do something on raw materials in general. They are very important. We were happy when the Commission tabled its first paper, the RMI in 2008, but now we are quite sad because we waited for a long time for the new communication and we are disappointed, because they enlarged it very much to agriculture policy. I think that it is the wrong strategy, because agriculture is too important to be mixed together with iron ore, etc.

The three pillars of the communication are important, but one has to ask what are they looking at, what weight do they have, and whether they are equally weighted. All three are important, but I think that recycling policy is the most important.

I can't see in this new proposal any new initiative. The Commission repeats what it wrote in 2008, but I can't see any clear weighting between the pillars. And this is clearly a good chance for the Parliament to help the Commission.

This is why a cross-party European raw materials group of MEPs will be established (15 February). We want to work with industry, with those engaged, to see on which corner we will be able to work. We might need to contact the WTO and the OECD, and certainly Commission and the Council.

The group is only for MEPs but next to it there will be a European raw materials club of companies with members from industry. It will manage its own work but the MEP group will certainly work with it to get industry expertise on, for example, what is currently going on in Africa, India or China.

The most interesting thing about the MEP group is that we not only have members from different political groups but also from different committees. Raw materials are not only an issue for the environment or foreign affairs – it is also an issue for the trade and development policy committees.

Will you have any specific focus on certain raw materials?

We exclude agriculture and refineries – the oil business for burning in general. But we include companies that use oil to make cosmetics or chemicals. Oil is important but rare earths are very important, and there are a lot of SMEs.

China has imposed export restrictions and now companies pay double the price of rare earths on export duties – which then doubles the price of a product. And if China will restrict export of rare earths and ceramics we will have a problem also in steel factoring as it needs ceramic to be able to have iron ore furnaces burning.

When I started with this issue, I thought it is only an issue for the big ones in the world, but that's wrong. And in particular via the suppliers or companies who produce things like electronic recording devices. These are often small companies, which don't have the power of buying.

Will you only focus on critical materials or will you also address price volatility in non-critical raw materials?

The United States has already established a definition for critical and non-critical. A Yale University paper refers to critical only with regard to reserves still available. We think that maybe criticality is also about the amount needed.

If I had all the answers we would not need to start this operation. So we would like to talk with the people in the industry and the US administration, bring our experience there and then discuss whether we should follow the US definition of criticality or maybe modify it for Europe, or we all together modify it.

But I think this is one of the first priorities we will have, agreeing on this fundamental definition. 

The United States and Europe need to work together in this field. We are partners. And when the United States and Europe go more or less to the same direction we are able to influence worldwide definitions, standards and regulations.

But if we go separate ways, maybe the US will join forces with China and India. And I don't want that. I'd like to be in the leader group on this with the US and Europe, and maybe we can have a lot of countries with us – such Japan and South American countries.

Are you afraid of China's rare earth ban? Should EU take action in the WTO?

If Europe and the Unites States go to the WTO court, it is right. The Chinese must realise that we cannot accept everything. But finally, I like negotiation processes and I like to find an agreement via the WTO or the OECD. But in the moment I think the idea of going to the WTO is right.

Some say that if the EU went to the WTO court over export quotas, and even if it emerged victorious, then WTO decisions take so long that we might run out of rare earths before that.  

You point to a very important thing for our group. We do not want to have a second debate club, we want to find out where the problem is, who creates the problem and where the tools to solve the problem are.

This means that we want to react quickly to information we receive from, for example, company experts on their experience in Africa and take action immediately, be it in the Council, the WTO, the OECD or somewhere else, but we cannot start drafting and voting on resolutions in the European Parliament.

We want to give to the Commission, WTO and OECD directly all information and not via some national association, which then sends a letter to a commissioner. We need to take direct and quick action – mostly because something is burning there, it's an important issue.   

Last year, German companies said they were already experiencing shortages of supplies of some materials.

One of the biggest problems is money. The Chinese come with a suitcase of money and the Germans come with empty pockets. The Chinese are able to buy mines in Africa and they buy with cash. And they close the mines after having bought them. They buy and close mines and then push the prices higher.

So there are a lot of different steps and we need to learn what's going on there. And what influence do these steps have on international markets? If they buy five mines in Africa and close them immediately, you can imagine that it has an immediate effect on the price.

They buy iron ore, copper mines. If you can open the mine two years afterwards, it's OK, but the problem is that if you close the mine, you cannot always reopen it later on if, for example, the water goes in, because you need pumps to keep it dry.

So they do this only to push prices up?

Certainly, why not – it is quite intelligent actually. And they do it because they are able to do it. Even all European steel companies together cannot do the same, because they don't have enough cash flow.

I understand that the Australian government, on national security grounds, intervened and objected to Chinese plans to buy a mine in Northern Australia.

Unfortunately in Africa you don't have governments taking care of that. 

There are a wide range of open interesting questions.

The Commission's communication has a strong focus on linking development policy and raw material policies. How do you see this being done?

Let me give you my answer to development policy. A Russian mining company gets for one kilogram of nickel €2.5. After, it goes by train to Europe and is negotiated in the stock exchange in Chicago and a company in my constituency needing nickel will end up paying €500 for it.

With this I want to say that development policy is a big part of this debate, because we have to pay a fair price at the beginning. With €2.5 per kilogram you cannot have security in the mines or pay a fair price for workers with that. Perhaps €500 is an OK final price but the mining company needs to get more for it, initially.

Do you think that if European companies proposed to pay more for different raw materials at source, they would get better or privileged access to the resources?

Once again, I don't have a clear answer, but I think that if you start negotiations with all these countries, it has to be on a fair basis. Often in the past we have not had fair prices for raw materials.

I'm not surprised that African countries are not developed enough. And we are interested in having developed countries in this region so that we can sell our high-tech products. I don't want to sell potato chips to Africans – I want to export computer chips. We have to help them to develop their countries and for this, the price paid for raw materials needs to be increased.

They need security, because they are so reliant on the high fluctuation of market prices.

But even if materials were paid for more at source, the issue of bad governance remains an issue in many African countries and higher initial prices do not necessarily mean that workers will be paid more or that conditions will improve for them.

Once again, we don't have the answer to every question, but we have to start from somewhere.

We have to keep this in our minds, listen and see how these countries develop. I don't want to bring our money to any despots in these countries – I would prefer to keep the money in Europe.

I believe that if you want to develop something it is not possible that one country develops and the other one is not able to develop. It does not function. It can work for some years, but will collapse in the end.

It seems, however, a bit hypocritical to start worrying about the development of these countries only now, when we realise that there may be a shortage of some raw materials.

My comments are based on market instruments – I'm not a social worker. But once again, I have no final answer. And the Parliament's development committee will participate in the MEP group on raw materials.

How should EU waste and recycling strategies be changed to fully contribute to raw materials policy?

We have to have common standards, better regulation for illegal shipments and clarification on from what point an old car is a car for recycling.

But we also need to change our behaviour and consciousness. All of us – both consumers and producers. Producers and industry in general who are not producers but use equipment are not realising that at the end of its life some technical equipment is a valuable part of the economy, and they just give it away to a scrap dealer. But scrap material has an economic value and we give it to the wrong people instead of bringing it in a proper infrastructure.  

Caterpillar has realised this and only rents its machines over 40 tons in order to get the 40 tons back at some point. You can only use the machines, not own them. So companies are interested in getting the materials back and according to producer responsibility you have to pay the recycling costs. Not only will the initial investment in recycling pay itself back, but it gives companies direct access to raw materials.

Producers are the only ones who can change the recycling targets. If you buy something you are not able to change it, but the producer can, because they can construct it with a friendlier and more recyclable way. So the producer is a key player.

Regarding domestic virgin material mining in the EU, do you think we need an EU-wide or national strategy on this?

We will have some tough debates on this.

We will have to look where our raw materials are and whether it is possible to open or re-open mining companies in Europe – or are there some regulations which stop this operation, such the EU Habitats Directive?

We have some mines in Germany that were running well and then closed because the companies went bankrupt and reopening was not allowed later because of the Habitats Directive. This is something we have quite often.

Here, we need to bring both interests together. But that will create some problems because you can see that NGOs are not so happy about that. But on the other hand, if they are no longer able to use computers, for example, they might think differently.

But it is not quite either or, and in Germany, for example, we are always doing a bit more than necessary, especially with regard to the Natura 2000 Directive. And we have talked a lot about the implementation guidelines there.

But this will be a tough item. 

At least Germany and Finland have already devised their own strategies for raw materials. What role do you see for national-level strategies on the matter?

I think that it is good that every member state works on this issue. But finally Europe has to coordinate them because one country is not much at global scale.

If we want standardisation and influence, then Europe has to be a very important coordinator. I'm not against national strategies – I think that they are important, but in the end we need to cooperate.   

Inspired by a similar US bill, the Dodd-Frank Act, the European Parliament is calling for an EU law to ensure that imported minerals are traceable as a tool to combat illegal exploitation of conflict minerals in African countries. Do you support this call?

We will have a debate about that. I have not made up my mind on this yet. On the one hand I see that if you have too much transparency maybe this will be a problem for companies. So I will read more about that.

Here we are at the start of debate and I don't yet have an answer to this. I dare to not to know everything and say it.

What are the priorities of the MEP raw materials group? What will you start with?

Rare earths will maybe be one, then foreign affairs and trade, and development and recycling.

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