European industries feel increasingly constrained by tight supplies of rare metals and other minerals that are used in such products as mobile phones, magnets and aircraft. The European Union’s political leaders have been slow to respond to the raw-materials squeeze, which saw rapidly growing demand exacerbated by the increasingly restrictive policies of China, the main supplier of many critical metals. 

Over the past couple of years or so, however, the security of raw-materials supplies has gained in prominence. Last February, the European Commission issued a strategy on raw materials: primarily metals but also wood and rubber. The strategy is supposed to “ensure that supply of commodities and raw materials matches demand in a resource-efficient way, contributing to sustainable growth in the European Union”, said José Manuel Barroso, the president of the Commission.

Rare earths

Industries in the EU are among the world’s main processors and consumers of metals, including a group of minerals known as ‘rare earths’, whose supply is tightening as demand rises. The EU imports all of the cobalt, platinum, titanium and vanadium that it uses, half of its copper ore, 64% of its zinc and bauxite, and 78% of its nickel. Compounding this import dependency is the distribution of suppliers: production of these critical raw materials is concentrated in just a handful of countries. Brazil produces 90% of the world’s niobium (an ingredient in alloys used in pipelines and jet-liners); South Africa holds 75% of the world’s reserves of manganese (essential to iron and steel production); China produces 95% of global rare-earth concentrates, used to manufacture consumer electronics and magnets.

Among strategically important metals, rare earths have gained particular prominence, primarily because China, their main producer, has gradually tightened export restrictions – export tariffs and quotas – since 2008. The following year, China’s ministry of industry warned that production of certain rare earths would exceed domestic demand, an indication that the government intends to stick to its policy of tightening supply.

China’s restrictions prom-pted co-ordinated complaints last week to the World Trade Organization (WTO) by the EU, Japan and the United States. As Chinese firms move up the value chain and ramp up manufacturing, China has emerged as one of the main consumers of many raw materials, as well as their most important producer.

The United States Geological Survey in January estimated world production of rare earths to be 133,580 metric tonnes, of which 130,000 tonnes in China (primarily in Inner Mongolia). The remainder was mined in India, with 3,000 tonnes, Brazil with 550 tonnes, and Malaysia with 30 tonnes.

‘Resource nationalism’

Last year, the British Geological Survey issued a risk ranking of strategic metals and other minerals based on their abundance, the location of current production and reserves, and the political stability of those locations (or ‘governance’). Rare- earth elements came fifth, together with niobium. The report concluded that the likeliest sources of supply disruptions were “human factors such as geopolitics, resource nationalism” and unforeseeable events such as strikes and accidents. “Policymakers, industry and consumers should be concerned about supply risk and the need to diversify supply, from earth resources, from recycling more and doing more with less, and also about the environmental implications of burgeoning consumption,” the report concluded.

Reinhard Bütikofer, a German Green MEP who is drafting a report for the European Parliament on raw materials, believes that the EU needs to become smarter in addressing the supply risk to critical raw materials. “The supply of raw materials, particularly rare earths, is as volatile and risky for Japan as it is for the EU,” he said. “Yet, so far, Japan has been much more ambitious than us in using efficiency, recycling and substitution strategies to counteract the dependencies that we are all experiencing.” Such strategies, Bütikofer says, could have a significant – if gradual – impact on suppliers. “Every time someone recycles a cell phone or a notebook, some resource-rich regime or monopolist shrinks a little.” Currently, almost none of the rare earths used in Europe is recycled.

Recycling?

However, the business case for recycling and other strategies to reduce dependency remains weak, raising the prospect of regulation. “For more efficient recycling, we need new technologies, we need a more understanding and co-operative public, but most importantly we have to set the economic conditions right,” Bütikofer said. “We should not be afraid of regulating a business case in favour of recycling.”

The EU’s hunger for raw materials has affected relations not only with China, but also with other current or potential producers.

The economic partnership agreements (EPAs) that the EU has concluded with most African, Caribbean and Pacific countries contain an obligation to scrap export restrictions, a particularly contentious point in the negotiations on which the Commission showed no flexibility.

Several African governments suspected the EU of seeking to secure reliable access to raw materials, and complained that this might prevent African economies from producing manufactured goods rather than just raw materials.

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European Innovation Partnership

At the end of February, Antonio Tajani, the European commissioner for industry and entrepreneurship, launched a ‘European innovation partnership for raw materials’. The innovation partnership is an attempt to focus the EU’s innovation policy on particular areas of need. EIP aims to encourage member states, private companies, advocacy groups and researchers to work together on strategies, pool capital and exchange best practice. Issues identified as suitable for EU support include finding substitutes for at least three key applications of critical and scarce raw materials, and such pilot actions as demonstration plants for the exploration, extraction, processing, collection and recycling of raw materials. The partnership is supposed to advance technology to tap into unexploited minerals lying at a depth of between 500 metres and 1,000 metres below the surface.

The ERECON PROJECT

Last September, the European Parliament approved a pilot project under the EU’s 2012 budget to launch a Rare Earth Competency Network (ERECON), proposed by Reinhard Bütikofer (German Green), Vladko Todorov Panayotov (Bulgarian Liberal) and Ioannis Tsoukalas (Greek centre-right). The project is supposed to improve our understanding of the recycling and substitution of rare earths and to support their sustainable mining and mineral processing. The project, which has a budget of €1 million, has just begun, with the setting up of a secretariat in the European Commission’s enterprise department.