EU Green Deal cannot work without a strong commodities industry – EURACTIV.com

Bernd Schäfer, CEO of EIT RawMaterials and spearhead of the European Raw Materials Alliance, stresses the need for a comprehensive strategy and urgent action to secure the future of the strategic raw materials sector in Europe and its ensure that it can ensure the green and digital transition.

Europe is at a historic turning point from the point of view of raw materials. The COVID-19 pandemic has disrupted global supply chains, causing shortages of a wide range of strategic raw materials for the implementation of the European Green Deal. The war in Ukraine has compounded the impact on the sector’s global competitiveness due to soaring energy prices. These more immediate challenges are set against a background of worrying and growing long-term overdependence on imported raw materials.

Europe has belatedly realized that some raw materials are indeed critical – critical because of their scarcity but increasingly because of their relevance to European sustainability and industrial leadership ambitions.

Raw materials are the bedrock on which much of Europe’s industry and prosperity rests, and without access to affordable and sustainable raw materials, the European Green Deal cannot be achieved.

To illustrate some of the causes and consequences of our overdependence on imports and the danger it poses, one need only look at the recent supply crisis in the magnesium industry and its worrying snowball effect on related sectors.

Magnesium is a key alloying material for the aluminum, steel or die-casting industry. For example, aluminum containing magnesium is widely used in the automotive and construction industry, but also in everyday products such as packaging. In the 1990s, China began dumping cheap magnesium illegally. In 2001, the last European magnesium plant had closed and the European value chain had emptied. With more than 93% of its demand dependent on Chinese imports today, Europe is in a position of almost total dependence. When production in China is reduced, Europe has no influence on the price escalation, and China decides how much it will disrupt our manufacturers.

This is exactly what happened. Due to the Chinese government’s efforts to reduce domestic electricity consumption, the supply of magnesium from China has been interrupted or drastically reduced since September 2021, leading to an international supply crisis of unprecedented magnitude. . China massively reduced its magnesium production, and within days magnesium prices rose to levels five to seven times higher than the already high post-Covid market prices. Industries in Europe not only faced skyrocketing prices, but suddenly had no supply at all.

The issue has become increasingly important for Europe, which consumes a fifth of the world’s magnesium supply since the West imposed sanctions on Russia following the invasion. To mitigate the effects of the current crisis and avoid future supply shortages, the European Union has launched a campaign to revive domestic production of magnesium, used in aluminum and steel products, with at least three organizations working on projects. In a European Commission working paper made available to Reuters in May 2022, he said the EU should aim to meet 15% of its magnesium needs nationally by 2030.

This is good news because the potential for producing and recycling more magnesium for the energy transition is large and untapped. Aluminum’s recycling potential is also impressive. European aluminum is already a clear leader, with recycling rates of 76% for beverage cans and 90% for automotive and transport as well as building applications. This is in stark contrast to the 1% benchmark which is recycled for more rare earth elements.

Moreover, at the legislative level, the EU is moving more and more towards strategic autonomy in critical raw and primary materials. The European Commission’s action plan, the creation of the European Raw Materials Alliance and the report of the European Parliament on a European strategy for critical raw materials define a series of measures which can make a significant contribution to the supply of sustainable and safe raw materials for Europe.

Diversification of supply, strengthening of existing value chains based in the EU

It is important to look at the aluminum sector. One of the most complete value chains in Europe in the raw materials sector today, the sector creates 1 million direct and indirect jobs and generates 40 billion euros in annual turnover in Europe. A key component of resource- and energy-efficient renewables, batteries, power transmission and construction or mobility, European aluminum is essential for the development of clean technologies and the circular economy: Thanks to its permanent properties, it is circular in nature and has a carbon footprint of only a third of the Chinese average. It has become clear that the Green Deal cannot be achieved without a healthy and vibrant European aluminum sector, but this sector is increasingly facing an existential threat.

As with magnesium, aluminum is subject to the same Chinese domination that has been made possible by generous state subsidies and tax exemptions. State-subsidized overcapacity, underpricing and resource shuffling are ways China has used to erode European industry for more than two decades. There is no reciprocity in any way for either of these conditions, nor for their current environmental, social and governance standards. Therefore, this situation needs to be addressed urgently, in order to allow a more level playing field.

Since 2008, Europe has lost more than 30% of its primary aluminum production, a trend that has worsened in recent months, causing an additional 900,000 tonnes of aluminum production to stop or stop between fall 2021 and today. Growing import dependence on Chinese aluminum also threatens Europe’s decarbonization efforts.

Europe’s work on securing raw materials – from rare earths to base metals – and the pursuit of strategic autonomy must be at the very heart of our sustainability and industrial strategy. Materials such as aluminum or magnesium are too strategically important to be left to third countries with weaker sustainability and questionable business practices.

As EIT RawMaterials, as well as European industry and policy makers, we must continue to develop a comprehensive, long-term and comprehensive strategy which recognizes the strategic importance of materials such as aluminum in mobilizing finance for investments to accelerate European industry now. We need to ensure strong and coherent trade and industrial policies that defend and encourage EU production and help accelerate long-term investment. And we need to further facilitate access to affordable green energy that is needed for a largely energy-intensive commodity sector.

Industry and policymakers must work together to create a level playing field between domestic and international operators if we are to reverse the damaging trend of carbon and investment leakage and ensure that import dependency does not undermine the Green Deal.

Today in Europe we can mine underground, have state-of-the-art operations and electrify entire supply chains. Europe is widely admired around the world for its leading role in the circular economy – these factors have accelerated the great potential of the primary and secondary raw materials industry.

A promising future for Europe is therefore well underway and within our reach. But we must address these critical challenges now.

Comments are closed.