Europe’s Materials Shortage Stands in the Way of Innovation

The COVID-19 pandemic has highlighted Europe’s dependency on certain products, critical materials and supply chains. Materials encompass everything involved in the discovery, development, and processing of raw materials. There are currently 30 materials on the bloc’s critical resources list, an increase from only 4 years ago when the list consisted of only 3. Although countries such as the US and Australia also have similar concerns, Europe’s dependency problems are greater due to its lack of sources of abundant material. Instead, it depends heavily on raw material imports for everything from large infrastructure projects to pioneering scientific Research & Development. This shortage of raw materials is an increasing area of concern due to the fact that the EU has climate neutrality goals it aims to reach by 2050. The European Commission estimates that just in order to meet its climate goal, it will need up to 18 times more lithium and 5 times more cobalt for use in electric batteries by 2030 and the forecast rises to 60 times more lithium and 15 times more cobalt by 2050.

 

This increasing list of shortages highlights the importance of maintaining strong relationships with foreign powers and continuing operating diplomatically as a unified bloc, as was the intention when the European Union was founded. Brazil supplies 85% of the EU’s niobium, a crucial steel alloy used in the production of jet engines, girders and oil pipelines. 95% of the EU’s borate supplies, critical in the oil refinery process, is mined in Turkey. The relationship between both countries with the EU have become tense due to the authoritarian policies and anti-democratic methods utilised by both presidents Bolsonaro and Recep Tayyip Erdogan. The situation also calls attention to China’s dominance in these markets, especially amongst common industrial metals. China’s dominance in battery raw materials, for example, has become more significant given increased interest globally in greener energies. The Democratic Republic of Congo produces 60% of the world’s cobalt, of which 80% is refined in China whilst 65% of the world’s graphite and subsequently 86% of the world’s anodes for lithium-ion batteries is also sourced from China.

 

Currently, plans seeking to reduce dependency on imports by increasing the output of domestic mining activities are being developed. In July, the Norwegian polysilicon manufacturer Elkem announced their plans to build Europe’s first graphite factory, situated in Herøya, Norway. A collection of European companies is also aiming to disrupt the domination of the lithium processing market by the Chinese and begin mining and refining their own lithium. The Infinity Lithium Corporation is seeking permission to mine the resource in Spain; Savannah Resources are hoping to develop an open-pit mining operation in Portugal, a mine where the ore deposits are found close to the earth’s surface meaning expensive extractive processes and tunnels are not required. Meanwhile in Germany, the start-up company Vulcan Energy Resources is planning to extract lithium metal compounds from geothermal waters, pioneering a potentially exciting new way of obtaining lithium in a commercially competitive way. Finally, the global mining conglomerate Rio Tinto owns the rights to a deposit of a unique lithium and borate mineral called jadarite in Serbia. However, it is not expected to be extracted for at least another 2 years, which does not help Europe’s materials predicament in the short-term.

 

Currently, with the bulk of natural materials being sourced from developing countries and transported to developing powers, the EU has lost its grip on supply and their prior position of first-in-line for the purchase of these materials is threatened. The recent successful negotiation for the UK’s exit from Europe does not leave it exempt from this scarcity problem. In order for the UK to replace all its current vehicles with electric ones, a long-term goal pre-ambled by Boris Johnson’s 10-point plan, it would require over 200,000 tonnes of cobalt, just under twice the annual global production and over 2 million tonnes of copper, more than half the world’s production. Several investigations and studies have been launched by the British parliament in an effort to understand the depth of the UK’s future manufacturing situation. The Government Office for Science’s recent report has focused mainly on the search for alternatives and dematerialisation (or the use of less material in new builds and reinforcing re-use and recycling strategies). It remains to be seen what decisive action the UK will take; however, it is clear that the longer this problem looms without initiative being taken, the worse it will become.

 

Clear steps are being taken by the EU towards the creation of more self-sufficiency in domestic industries in the hope that it will come closer to finding solutions to create a more independent trading bloc before it can be affected by supply squeezes from the world’s largest materials exporters. This will protect the bloc should international tensions rise, or conditions allow for its current suppliers to engage in arbitrage or use its weakness as a bargaining chip.

 

By Will Kollard

Sector Head: Edouard Nelson

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