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Enterprise & Industry Magazine

A European strategy for raw materials

All rights reserved © Dragan Trifunovic - istockphoto.com

Raw materials play a key role in industrial competitiveness, including in sectors developing environmentally friendly technologies, such as electric cars and photovoltaics. Building on previous initiatives, the European Commission has proposed a set of actions that seek to enhance the EU’s access to raw materials in its competitiveness, social and environmental dimensions.

Raw materials and commodities are the lifeblood of European industry, yet their prices and supplies are becoming increasingly volatile and precarious which can lead to large fluctuations in costs for producers and, hence, also in consumer prices.

This is occurring at a time when European industry is facing growing competitiveness challenges in the global market. In fact, this volatility is also due to the changing patterns of global supply and demand of primary resources, as reflected by the major surge in demand from emerging economic powers, such as China, which is already the largest consumer of metals in the world. And with almost 14% of jobs (30 million) in the EU in businesses which depend on mineral raw materials, there is no room for complacency.

Moreover, this challenge looks set to continue well into the future. An EU-backed expert report released last year identified 14 minerals and metals that were in a situation that it deemed to be ‘critical’ out of a list of 41 it analysed.

In order to address the challenges posed by raw materials, the European Commission recently outlined, in a Communicationpdf Choose translations of the previous link , a set of strategic actions to ensure that European industry has reliable and stable access to resources in the coming years. In terms of raw materials, the key elements of this strategic approach are:

  • Regularly updating the list of critical raw materials (see below) already identified by the European Commission
  • Monitoring the development of access to critical raw materials with the view to identifying priority actions
  • Strengthening the EU’s raw materials trade strategy and engaging in ‘raw materials diplomacy’
  • Developing bilateral co-operation with African countries in the area of raw materials, based on promoting good governance, investment and geological knowledge and skills     
  • Improving the regulatory framework for sustainable extraction within the EU
  • Enhancing resource efficiency and promoting recycling
  • Promoting further research and innovation efforts along the entire value chain of raw materials, from extraction, processing, recycling and resource efficiency to substitution.

The new Communication also put forward an ambitious programme to increase the integrity and transparency of commodity derivatives markets.

For sustainable and inclusive growth

The Europe 2020 strategy is the EU’s master plan for promoting smart, sustainable and inclusive growth over the coming decade through seven flagship initiatives. Raw materials have an important role to play in two of these flagships, ‘An integrated industrial policy for the globalisation era’ and ‘A resource-efficient Europe’, which group and link up mutually reinforcing policies with a view to achieving the key overall objectives.

Fitting in this strategic framework, the recent communication on commodities and raw materials builds on and further develops the results of the Raw Materials Initiative, which was launched by the European Commission in 2008 to ensure that European businesses and industry do not suffer a competitive disadvantage over resource-rich countries. The Initiative laid down measures in three areas which have been confirmed and integrated into Europe 2020: ensuring fair access to supplies from outside Europe; improving conditions for mining within Europe; and promoting recycling and resource efficiency.

In addition, as recent developments on commodity markets show that the prices of derivative and physical markets may be linked in multiple ways, the document presents an integrated strategic vision for commodities and raw materials.

“In order to secure the supply of raw materials for European industry for the coming years, we need to link this policy with our reforms of the regulatory framework for financial markets,” European Commission President José Manuel Barroso said. “Better understanding the synergy between the two will ensure that supply of commodities and raw materials matches demand in a resource-efficient way, contributing to sustainable growth in the European Union.”

Material for diplomacy

Europe needs to maintain and gain access to raw materials from third countries, but it aims at doing so in a way that is fair to both sides, and creates win-win situations. This can be achieved through what the European Commission calls “raw materials diplomacy”, through the promotion of good governance, human rights, conflict resolution, non-proliferation and regional stability in resource-rich countries.

Towards that end, actions have already been launched in the framework of the raw material initiative. For instance, the African Union Commission (AUC) and the European Commission have agreed to work together on governance, infrastructure and geological knowledge and skills. Africa has great potential which is not fully developed. During the discussions held in Addis Ababa in June 2010, Antonio Tajani, European Commission Vice-President in charge of industry and entrepreneurship, emphasised: "There are many synergies between the external development dimension of our raw material initiative and the economic development dimension of the Africa Mining Vision."

The EU has encouraged better governance under the 10th European Development Fund (EDF), whilst the EU-Africa Infrastructure Fund has financed geological surveys to enable resource-rich countries to be better aware of what mineral wealth they possess. The EU is also helping to create a sounder investment climate by funding projects that promote revenue transparency in the extractive industries.