Automakers worried about metals, not rare earths

Five German car manufacturers are under pressure after the European Commission said it is investigating their involvement in a potential cartel.

This article is part of our special report Raw Materials.

The European car industry today seems more worried about the rising price of metals than about China's moves to restrict rare earth exports. EURACTIV spoke to Renault and other car industry representatives, who predict that tensions will have been alleviated within three to four years.

Rising oil prices and tighter CO2 emission standards have pushed car manufacturers to find alternatives to the combustion engine.

Among EU carmakers, Renault has been at the forefront of this development, with plans to sell one million electric vehicles in the world by 2016, together with its partner Nissan.

But doubts have been raised as to manufacturers' ability to secure access to key raw materials needed for the batteries of electric vehicles.

For instance, a kilo of neodymium, a rare earth mineral, is necessary to make a high-power, lightweight magnet used in electric motors of hybrid cars, such as the Toyota Prius.

And China, which produces more than 95% of rare earths, has gradually reduced its export quotas as part of an effort to retain more of the minerals for domestic manufacturers, a policy that has raised alarm among nations with industries that depend on them for high-tech applications.

Renault not worried

But not everybody is worried. Philippe Schulz, an expert in energy and raw materials at French carmaker Renault, believes the hype around rare earths will have evaporated three years from now.

"We are not exposed to a risk shortage of rare earths," Schulz told Autoactu.com, pointing out that there are 800 years worth of reserves available. "We are only exposed to a time-limited rise in cost because of rising demand in a producer country," he told the news site.

"Three to four years from now, there will be no tensions around rare earths anymore," Schultz said.

Schulz explained that the current concentration in rare earth mining in China is a relatively recent trend that can be overturned. "Before 1985, China was not an actor on this [rare earth] market," he pointed out. "From the year 2000, it has replaced the other producing countries like Brazil and India, because its prices were much more competitive. Countries then closed their mines."

But with prices on the rise, the US is now planning to re-open its old mine in Mountain Pass, California, and Australia will soon re-open its mine in Mount Weld. And "other countries will follow," Schulz affirmed.

Nicolas Meilhan a senior consultant at Frost & Sullivan, a market research and consulting firm, agrees. "For a number of countries, it is now becoming more profitable to exploit rare earths than to import them."

"Rare earths are not a critical issue for the auto industry," Meilhan said.

Technological choices to reduce dependency on rare earths

For carmakers, technological choices are also key. 

Toyota, currently the world leader on electric vehicles with its flagship hybrid car Prius, announced at the end of January that it was developing an engine "using less rare earths".

And Schulz said the Renault-Nissan alliance, has managed to reduce its dependency on rare earths by adapting its technology. As a result, electric engines manufactured by the alliance "need ten times less chemical elements than other engines using a technology called 'permanent magnets'," he said.

However, lithium remains an issue for the batteries used in the car industry, as it faces strong competition from other industrial sectors. Car manufacturers have found alternatives using nickel and zinc but lithium-ion batteries remain the most widely used technology for now.

Schulz, however, says lithium is not a problem as Renault-Nissan has secured its supplies "via agreements allowing battery suppliers to have a guaranteed supply of lithium".

And in any case, the electric car market is expected to remain marginal, representing about 10% of vehicle sales in 2020, according to the most optimistic scenarios. By then, new technologies relying on other raw materials will come onstream, experts believe.

Lead shortages looming

But before electric cars dominate the market, the automotive sector will have to continue relying on lead for its batteries.

And there, problems could come up more quickly than generally imagined. The auto sector is the largest consumer of lead, with 60% of world production going to car manufacturers, according to Prim'finance, a fund management company specialising in raw materials.

And according to the US Geological Survey, the world's lead reserves will have expired by 2030 if the 2008 production levels are maintained (3.5 million tonnes were produced that year).

Problems are similar for copper, which is utilised in automotive cables and sold for $11,000 a tonne. "Studies announce 35 years worth of reserves of copper if we base ourselves on 2008 production levels," said Nicolas Meilhan of Frost & Sullivan. "But this deadline could come closer when taking into account the rapid growth in demand for copper," he warned.

When pressed to mention what other metals could become problematic for the car sector, industry representatives quickly fall silent. Steel? Aluminium? Iron? Platinum?

"This question is too strategic," said several people in the industry. "All raw materials are exposed to a risk of brutal rise in prices or time-limited shortages," said Schulz. "One has to anticipate them and put solutions in place," he added.

Recycling as an alternative way of securing supplies

In its February initiative, the European Commission identified recycling as one of the three pillars of is raw materials policy, the other two being trade and domestic mining.

On the diplomatic front, EU automotive manufacturer and supplier associations ACEA and CLEPA have called for "a systematic consideration of raw materials supply in bilateral free trade agreements with third countries," taking example on the agreement struck between Japan and India.

When it comes to recycling, this is something the industry has been doing for a long time, says Renault's Schulz. "First, our vehicles must be recycled up to 85% by 2015. Second, in collaboration with our parts suppliers, we work upstream to introduce recycled parts in the production of our vehicles."

"But this circular economy, which consists in putting back parts in the production cycle is difficult to implement and can be costly given the changes that this implies. It must be made on a case-by-case basis with each supplier," Schulz explained.

Volvo Trucks is one of the rare manufacturers to communicate its statistics on how recycled parts are used in its production lines. "30% of the weight of new trucks are made of recycled raw materials, with rates going up to 50% for iron and 97% for cast-iron," the company says.

Patrick Poincelet, head of recycling at CNPA, a French association representing professionals in the automotive value chain, said: "The problem with recycling comes mainly from a lack of downstream markets for recycled products. As long as we don't put in place competitive markets, recycling will not become a sufficiently attractive solution for industry."

"Taking only the case of vehicles, only 3% of recycled plastics used in the cars are coming from vehicles that we have destroyed," Poincelet points out. "And this is because we don't have a downstream industry which allows reintroducing recovered materials in new vehicles in a competitive way."

China eyeing Europe's used cars for recycling

Each year, 12 million vehicles are being destroyed in the European Union, representing a significant potential for raw materials recovery. And China has now started to tap this potential to emerge as a major player on the recycling market for cars.

Huaren Resources Recycling (H&R), a Chinese company, is buying up pre-treated car wrecks from Europe and ships them to China where they are stripped of their precious components: aluminium, steel, lithium, rare earths, lead, plastics, palladium, etc. H&R has announced an objective to recover two million car wrecks from Europe by 2012.

"According to documents that this Chinese company has showed us, recyclers in Spain and Austria have already accepted their offer," said Patrick Poincelet.

"We need the European Commission to take up the issue of recyclable waste exports to China if we want to secure our raw material supplies," he stressed.

(Emilie Binois for EURACTIV and Autoactu.com)

In November 2008, the European Commission presented a new integrated strategy for raw materials, suggesting three pillars for the EU's policy response to different challenges related to access to global resources:

Since then, an EU expert group has identified 14 raw materials seen as "critical" for EU high-tech and eco-industries and suggested that the bloc’ global diplomacy should be geared up to ensure that companies gain easier access to them in future.

For the experts, the "criticality" of these raw materials relates to their production, which is concentrated in a handful of countries – mainly China, Russia, Congo and Brazil. It also relates to difficulties in substituting them with more commonly available materials and to their low recycling rates.

An updated version of the 2008 plan was presented in February this year, with raw materials issues elevated to become a full part of the bloc's free trade agreements.

  • 9-10 March 2011: EU Competitiveness Council to address raw materials and commodity markets.

Subscribe to our newsletters

Subscribe

Want to know what's going on in the EU Capitals daily? Subscribe now to our new 9am newsletter.