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Securing raw materials for European competitiveness

Modern cars, flat-screen televisions, mobile phones, and countless other manufactured products based on technological developments of the past couple of decades rely on a basket of metals and other raw materials. In many cases, the quantity required for each product is tiny, but with a mobile phone made up of around 40 metals – such as lithium, tantalum, cobalt and antimony – it is a major challenge and cost for any manufacturer to ensure they have supplies of all of them.

Television sets, computers and other information and communications technology products all rely on a similar mix of such metals. The same group of high-tech metals are also fundamental in new environmentally friendly products, with electric cars requiring lithium, hydrogen cars platinum, and new fuel-efficient aircraft reliant on rhenium alloys.

Beyond the high-tech sectors, European industry relies on a wide range of other raw materials, including ‘traditional’ metals such as copper, aluminium and iron, minerals such as potash, silica and salt, and aggregates – sand, gravel, cement – used in construction. Recent data show that almost 14% of jobs (30 million) in the EU are in businesses which depend on mineral raw materials, and a similar proportion of EU gross domestic product is generated by these same businesses.

The importance of such enterprises to the EU’s economy is such that the European Commission has elaborated an integrated strategy to ensure that industries have fair access to the raw materials they need. The Communication on the ‘Raw Materials Initiative ’, adopted by the Commission in November 2008, encompasses measures in three areas to secure sustainable supplies of the materials needed for the EU economy: ensuring fairer access to supplies from outside Europe, improving conditions for mining minerals within Europe, and increases in the recycling of such materials.

Supplier scarcity

The EU is self-sufficient in terms of (relatively low cost) construction minerals, and is also a leading supplier of certain industrial minerals such as feldspar, perlite or kaolin. However, the geology of the European continent is such that many other raw materials, particularly (higher cost) metals, are not found in large quantities within EU borders, or are only found in situations where extraction is difficult and expensive. Moreover, deposits inside the EU which can be mined are often not fully exploited due to a highly regulated environment or competing uses for land, such as agriculture, which push up the costs of extraction to the point where it is not economically viable.

For high-tech metals in particular European enterprises are dependent on sourcing supplies outside the EU. In some cases, a few countries dominate supply, such as with niobium (90% from Brazil), rare earths (95% from China) and antimony (87% from China). Even when European firms have no difficulty in obtaining the supplies they need, they also have to compete with companies from those states which can secure their own supplies at lower costs.

Just as political concerns are rising about European energy producers’ reliance on a small number of foreign countries for the fossil fuels which still dominate our energy consumption, so too manufacturers’ dependence on a few raw-material supplying countries is ringing alarm bells. Demand for such materials is growing, with the current economic downturn expected only to bring a temporary reduction, so there is an urgent need to look at supplier relationships for the longer term.

Open markets

Resource-rich countries are more and more directing supplies towards domestic manufacturers. Whereas such manufacturers can often export their finished products to the EU at low duties or even tariff-free, EU manufacturers face a wide range of export restrictions and duties on raw materials, investment restrictions in supplier countries, or are quite simply charged higher prices than local buyers. In these circumstances, EU manufacturers are placed at considerable competitive disadvantage, and the Commission has identified more than 450 export restrictions on raw materials, underlining the scale of the problem. Moreover, there is a growing trend for economies which are already resource rich to try and gain controlling positions in other countries, particularly in Africa, which have abundant resources.

The Commission will work to ensure access to raw materials is given due weight in trade negotiations and in diplomatic relations with supplier countries. In particular, where EU manufacturers suffer discrimination in obtaining supplies, the Commission will look at means of using trade instruments to counter this discrimination through, for example, anti-dumping restrictions. EU industry is not the only one which faces challenges securing sustainable supplies of critical raw materials. Counterparts in the USA and Japan, for example, also need to ensure they have access to adequate supplies. Therefore, the Commission will identify issues in which a bilateral or multilateral approach can be taken, to secure supplies on an equitable basis on world markets and reduce trade-distorting measures.

EU development policy is an important tool for working with resource-rich countries, notably in Africa. Through projects and aid to develop and strengthen governance in such countries, the Commission aims to foster investment in sustainable mining ventures and create a more level playing field between companies wishing to access their raw materials.

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Many European companies have focused on importing supplies of raw materials, rather than sourcing them within the EU, due to costs. European regulatory procedures, planning processes and environmental and health and safety protection rules all add costs to mining activities. Moreover, where land is already in use for agriculture or other purposes, gaining access for mining can be both expensive and time-consuming. As supplies from outside Europe become less reliable and more costly, European industry will have to prioritise developing sources inside the EU.

The European Commission will work with Member States to improve the framework conditions on which mineral extraction depends, with the objective of simplifying and speeding up the administrative process. EU initiatives will seek to improve investigation and sharing of knowledge about mineral deposits throughout the Union, so that developments in land use above known mineral deposits should not preclude future extraction activities. In particular, the Commission will explore means to integrate information on sub-surface deposits into land-use planning tools being developed within the GMES initiative. It will also support research projects aimed at developing new extraction techniques for raw materials, including seabed mining, which minimise environmental damage.

Recycling proficiency

Rising costs for raw materials, and/or supply shortages, naturally encourage industry to step up efficiency in their use of raw materials and to devote increasing resources to recycling them. At present, a significant proportion of end-of-life products are not reliably processed to recover valuable materials, especially high-tech metals, which can be recycled. In particular, waste products are exported from Europe without effective controls over their final destination and processing prospects. The Commission will work with Member States to improve verification of the destiny of such waste shipments, to reduce the environmental damage caused and increase the proportion of recycling of their components.

The Commission will also support research projects to improve efficiency in the use of resources, both in product design and in processing. Effective action in this field, together with increased recycling will make a significant contribution to reducing dependence on imported raw materials.