Critical Raw Materials

Dr. Henrike Sievers

Bundesanstalt für

Geowissenschaften und Rohstoffe

Criticality of supply

• central part of all studies and discussions on raw material security.

• includes aspects like the import dependence of consumer countries, the concentration of

production in certain countries or companies, the availability of secondary raw materials

and substitutes, price volatility, success of exploration and new projects coming into

production

• includes (geo)political risks associated to concentrated production in countries of ‘strategic

distrust’ (which could be termed “political criticality”) or in unstable countries

Environmental/social criticality

• Social and environmental risks associated with raw material production

• includes the conflict related mineral production

Physical criticality

• dealing with the question whether the earth can provide the resources for the global future

demand.

Aspects of criticality

Technical availability:

Supply/demand

capacity, stocks

transport

Production costs, technologies

Geological availability:

Lifetime of deposits

Exploration

Import dependence: Degree of dependence

Importance of raw materials in the supply chain

Demand changes/adaption:

recycling, substitution,

material efficiency,

domestic raw material production,

stock piling

Market power:

Country concentration

Company concentratiom

Geostrategic risks:

Country risks

Concentration trends

Env./social aspects

Supply risk indicators

KOR IND KOR KOR KOR TAIW IND JP D KOR KOR

JP D D D

RUS RSA

JP D JP

D USA

JP JP

JP IND

USA USA USA

USA JP

USA

USA USA

USA

10

20

30

40

50

60

70

Alu Blei Kupfer Nickel Zink Zinn Stahl Erdöl Steinkohle

25,3 27,1 32,0 21,1 18,2 28,6

31,4

9,0

44,1

CN

CN CN

CN

CN CN

CN

CN CN

80

% Anteil der Top 5 Länder am Weltverbrauch 2005

Global raw material consumption Share of the five major comsumers of the global demand 2005

Al Pb Cu Ni Zn Sn steel oil coal

Co

nsu

mp

tio

n [

%]

5

Global raw material consumption Share of the five major comsumers of the global demand 2010

Co

nsu

mp

tio

n [

%]

Al Pb Cu Ni Zn Sn steel oil coal

(Quelle: BGR, Fraunhofer ISI)

EU Import Dependence

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Silver

Chromite

Aluminum

Copper

Nickel

Zinc

Tungsten

Lithium

Iron Ore

Manganese

Gold

Bauxite

Antimony

Cobalt

Germanium

Indium

Magnesium

Molybdenum

Niobium

PGMs

REE

Rhenium

Tantalum

Tellurium

Titanium

Vanadium

EU Import Dependence

x

1iWBLänder GPLr

Weighted country risk:

Sum of country values (% of global production) of raw material production (P) weighted

with the Governance-Index (WGI) of the world bank (WB)

moderate crititcal noncritical

7,0 6,0 5,5 4,5 4,0 3,0 BGR

1,0 0,5 0 -0,5 -1,0 WGI

Gold Tungsten

Source: Raw Materials Group, 2009 Source: Raw Materials Group, 2009

Country concentraion of the global gold and

tungsten production

noncritical moderate

1.000 10.000 2.000 >0

critical

1.000 10.000

Herfindahl-Index

2.000

Mine production

>0

unkritisch m äß ig bedenklich

6 4 3 7 5

noncritical moderate critical

6 4 3 7 5

Mine production

Country risk

1 2 3 4 5 6 7 8 9

Russia

Canada

China

Brasil

Australia

Kazakhstan

Congo, DR (Zaire)

South Afrika

Zambia

Botswana

Indonesia

Marokko

Zimbabwe

Cuba

New Caledonia

Country risk

-2.5 - -1.0

-1.0 - -0.5

-0.5 - 0.5

0.5 - 1.0

1.0 - 2.0

Cobalt production (mine) 2007 [t]

Data source: Worldbank, 2008; BGR database

Global cobalt production 2007

Source: „Critical raw materials for the EU“, European Commission 2010

China main producer

THE RAW MATERIALS INITIATIVE — MEETING OUR CRITICAL NEEDS FOR GROWTH AND JOBS

IN EUROPE

{COM(2008) 699}

http://ccgm.free.fr/index_gb.html Commission for the Geological Map of the World

10

Geological availability

11

(Source: „Minerals, critical minerals and the US economy“, US National Research Council, S. 50, 2007)

Global location of porphyry copper deposits

Ore Deposits are unevenly distributed

Exploration and mining projects of copper 2011

(Source: P. Crowson, Rescources Policy, 2012)

Porphyry copper deposits Sediment hosted copper deposits

Ore grades depend on type of deposit

14

Fe Al

Mg

Ti

Sn

Ni

Cu Pb

Zn

Cr

Mn

Ag

Au

PGM

Ga

Ge

In

Cd

Co

As

Bi Pd

Ni Rh Ir

Os

Co

Ru

Bi As

Pt

Se

Te

Ag

Au Pb

Mo Zn

Fe

Ca/Si Hg

Sb

Mg

Mn

Fe

Cu

Hg

Sb

Ti

Ca/Si

Ca/Si

V

Al

Fe

Mg

Mg

Pb

Ca/Si Al Cu

Co Fe Ni

As

Pb Zn

Al V

Sn Mg

Mn Cu Cr Ti

As

V Ga

Li

Mn

Cu Fe

Zn

Cr Ti

Cl

B

Mn

Br

Fe

Ni

Al

V

Nb Cr

Fe

Sn

Al

Mg

Mn

Zr

Ta

Ag In

Au Cu

Ag

Pt

Ru Te

Os

Ir

Co

Se

Rh

W

Bi Sb

Cu

Zn

As

Nb Pb Ta

Mg

Fe

Hg

Ca/Si

Cr

Sb

As

Sulfidische +

oxidische Erze Sulfidische

Erze

oxidische Erze

Hauptmetall

Neben-

produkte

In

Das Metallrad nach Reuter et al. und Verhoef et al.

von der EU als

kritisch bewertet

von der EU als potentiell

kritisch bewertet

By-products

(Source: European Copper Institute, 2006)

By-products

Paley Commission, 1952: US President's Materials Policy Commission

National Security Study Memorandums (NSSM),1974: The Critical

Imported Materials

European Community 1975: The supply of the Community

U.S. Congressional Budget Office, 1983: Strategic Critical Nonfuel

Minerals: Problems and Policy Alternatives

National Research Council, 2007: Minerals, Critical Minerals, and the

U.S. Economy

Resource Efficiency KTN, 2008: Material Security - Ensuring resource

availability for the UK economy

European Commission, 2010: Critical raw materials for the EU

Critical raw materials – not a new topic

1980s/90s:

end of cold war increases interregional

trade flows and globalization of supply

less state engagement

privatisation

China as producer

2000s:

China biggest raw material consumer

protectionist measures and securing

the access to resources in foreign

countries

concerns over the security of supply in

EU and other industrialized countries

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

Interventionism &

socialism

Political regimes Minerals

Emerging economies,

resource nationalism,

emerging state companies? State capitalism Rise of Brics

US-Soviet Rivalry

Decolonialisation, cold

war

Liberal capitalism

Liberalism, MNCs rise

US hegemony

Overarching regime WWII -1980s:

State involvement in resource sector

Strategic interest, security concerns

Thinking in blocks

But the framework is changing

Criticality of materials in the long term

Long-term criticality

Long-term criticality

Criticality of materials in the long term: tantalum as example

Existing models on criticality:

assessment of potential short term supply shortages

do not serve as predictive model or scenarios

models are only a snapshot in a dynamic system

studies from 70s and 80s followed similar approach, with defining other minerals as critical

in the 70s and 80s chromium, aluminum etc were defined as critical, today it is RE, PGM, Ge, Ga – what will be critical in 2040?

Concern of western industrialized countries is that the raw material supply is disrupted, because a functioning supply chain is the base of their economy.

Fear that raw materials could be used as a political instrument by countries to gain political or economic power.

Concern that markets conditions are different for the participating stakeholders. This would not lead to supply shortages but unequal opportunities for countries.

A further concern: extraction and production activities could be responsible for regional environmental and social problems and contribute to conflicts.

Long-term criticality

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(1) Accidental supply disruptions or price hikes

supply disruption (and ensuing price hike) might be the result of, a natural disaster or political

instability in a major producing country

(2) Intentional supply disruptions by the use of exports or pricing as a political

instrument

concern is that raw materials could be used as a political instrument by some actors. Those in

control of production or exports could use raw materials to gain political or economic power

e.g. by issuing embargoes, restricting exports or price gouging. In such cases an artificial

supply crisis (real or feared) could put political pressure on other countries and bring

disadvantages for the industries of countries depending on raw materials imports.

potential problems: embargoes, cartels, greater processing in exporting countries (i.e. shift in

the value chain), supply disruptions from events other than embargoes and exorbitant short-

term price increases. (The Study on Critical Imported Materials, 1974)

Long-term criticality

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(3) Unequal market conditions causing an uneven economic playing field

Tensions can arise when market conditions are different for the participating stakeholders.

This need not lead to supply shortages but could cause unequal opportunities for countries,

influencing economic competitiveness. Examples include:

Different internal/external pricing of resources for different countries

Unequal access to crisis mechanisms in case of a supply disruption or unequal impact of a

price hike (price asymmetries)

Unequal market access or investment opportunities

(4) Governance issues related to the resource sector

Concern that extraction and production activities could be responsible for regional

environmental and social problems and contribute to conflicts.

Examples of measures: Kimberley Process (dealing with so-called ‘blood diamonds’) and the

legislation on Conflict Minerals that is part of the Dodd-Frank Act (Section 1502) in the United

States (responsibility of companies to ensure their mineral supplies are not related to any

conflict zone)

Long-term criticality

Aspects to be considered:

criticality of supply,

environmental/social criticality,

physical criticality

Long-term vs short/medium-term criticality

Views on criticality are changing over time - depending on political

situation and technological development

Important factors:

geological conditions (e.g. by-products),

emerging technologies,

stability of producing countries,

changing behaviors of stakeholders (investments, legislation, etc),

security of transport,

location of refined metal production,

…

Concluding remarks