In the current climate, when the topic of supply shortages is mentioned, the automatic reaction of many of us is to turn our thoughts to items such as masks, antiseptic wash and toilet paper which, in the early days of the Covid 19 pandemic, seemed to vanish from shop shelves almost before they had been placed on them. Few of us would reference raw materials such as rare-earth elements, cobalt, lithium, and tungsten. Yet many materials, such as these, have become essential for the functioning of modern technology; the technology that so many people relied on during the ‘lockdown’ period both in Cyprus and, elsewhere around the world. Quite literally, in the case of tungsten, they enable us to ‘keep the lights on’. They also, together with 26 other raw materials, form the 2020 EU ‘Critical Raw Materials’ List (‘CRM List’).
The CRM List has been produced and revised every three years since 2011. Entries to the list are made based on the economic importance of the material and, significantly, the risks to its supply chain. These risks include factors such as concentration of supply in one geographic area, trade restrictions, governance aspects of a supplier country, the percentage of supply which is sourced from outside of the EU, the availability of substitute materials and the existing and possible contribution to supply that can be achieved via recycling. Since its inception, the CRM List has expanded from 14 items to 30 items. As shown in the map below, many of these items are primarily sourced from outside of the EU, rendering them extremely vulnerable to supply chain disruptions such as those cause by the Covid 19 Pandemic.
Figure 1: biggest supplier countries of CRMs to the EU
Source: European Commission report on the 2020 criticality assessment
Equally concerning is the fact the CRM List is based on historic rather than forecast usage. For example, Lithium features on the list for the first time this year and yet, to fully implement the Green Deal will require the use of almost 60 times the quantity of Lithium currently used within the EU. Predicting future resource requirements and developing and implementing a strategic resource security plan are both vital to the future prosperity and security of the EU. For this reason, the EU has undertaken and published its first ever Strategic Foresight Report (the ‘Report’) and, an associated ten-point Action Plan. The Report was adopted by the Commission on 9 September 2020. It will be revised on a regular basis.
The ten immediate action points flowing from the Report may be summarized as follows:
- Launching an industry driven ‘European Raw Materials Alliance’ with an initial remit to work on diversifying the supply chain and on achieving EU strategic autonomy in the rare-earth and magnets value chain.
- Developing sustainable financing criteria for mining and extractive sectors. Currently investors avoid them as they are perceived as high risk.
- Launching research and innovation projects linked to waste processing, advanced materials, and substitutes for critical raw materials.
- Creating a map of the potential supply of secondary CRM and proceeding to identify and support viable recycling and recovery projects.
- Identifying CRM mining and extraction projects that can be made viable by 2025. The fact that many current carbon and coal dependent regions are rich in CRM deposits is a boon. Focusing efforts in these areas should help offset economic decline which might otherwise be linked with the Green Deal switch to a carbon neutral economy.
- Developing EU expertise and skill in mining, extraction, and processing CRM – especially in the transitioning regions referred to in point 5.
- Deploying Europe’s earth-observation Copernicus Programme to identify new critical raw material sites, monitor the environmental performance of such sites both during their operational life and, after their closure.
- Developing research and innovation projects from 2021 onwards to minimize and offset any environmental impact of proposed new extraction sites.
- Developing strategic partnerships with ‘reputable’ countries to secure a diversified supply of sustainable CRM.
- Promoting responsible mining and extraction policies on a worldwide basis.
The Report is illuminating and the Action Plan ambitious. However, perhaps the real surprise is the time that it has taken the EU to realise that both forecasting the future raw materials it will require, and taking measures to secure their supply, are activities essential to the future economic and social wellbeing of the block. This would be true without the introduction of the ‘Green Deal’. However, once the Green Deal is factored into the equation, failing to deliver on the Action Plan is not an option. Never has the old slogan “Rinse, re-use, recycle” seemed so apt!
For more information over this matter, please speak with your usual contact in Elias Neocleous & Co LLC.