World Review | Europe’s call for greater transparency on raw materials

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Europe’s call for greater transparency on raw materials

Europe’s call for greater transparency on raw materials
Raw material prices have become volatile (photo:dpa)

ONE consequence of the worldwide financial crisis in 2008 was short-term shocks in key commodity and raw materials markets, as prices have not only fallen but have become increasingly volatile.

The change in the market came after five years of increasing demand for raw materials, driven by worldwide economic growth, rapid industrialisation and urbanisation in emerging economies such as China, India and Brazil.

The demand has made China the world’s largest energy consumer and the largest global consumer of raw materials.

The change in the market has posed questions for the European Union and its strategy on raw materials.

The major question since 2010 is whether the global metal and mineral markets follow a cyclical pattern based on global supply and demand or whether the recent trends of the global raw material markets have highlighted a new era of increasing shortages of particular critical raw materials (CRMs), such as rare earth elements (REEs) for use in the growing green technology industry.

A report published in 2011 by the European Commission, which updates its 2008 Raw Material Initiative, has addressed these questions, but has not always answered them sufficiently.

The updated RMI has expressed concerns about the lack of transparency and demands a close and efficient monitoring of market developments.

It also demands new thinking and initiatives for overcoming the problem in the EU that there are no recycling or substitution processes for REEs which are commercially viable.

But the updated RMI report has recognised some improvements.

The commission has also established new ambitious collection targets for recycling and substituting raw materials.

The RMI update of 2011 says it plans to monitor the raw material policy more closely to identify which actions merit prioritising, and to update the list of CRMs at least every three years.

It has also called on EU member states to examine the value and feasibility of a possible stockpiling programme.

A cross-party group of members of the European Parliament on raw materials, established in February 2011, has worked with a special European raw materials group of companies and industry members.

China has been at the forefront of those discussions because of its ambiguous raw material policies at home, in Africa and other regions. These policies have been criticised as ‘neo-colonial’, because China has helped those countries with infrastructure in exchange for resources.

In the light of China’s unwillingness to give up its export restrictions and quota, the EU has cooperated with the US on trade issues in a ‘new transatlantic alliance of concern’ to cope with an increasingly powerful China.

In July 2011, the three powers filed a successful complaint via the World Trade Organisation against China’s raw material policies and its export restrictions.

China ignored the WTO rulings and defended its export restrictions for environmental protection.

In the summer of 2012, after two years of trying to persuade China to abandon its export taxes and expert quotas without success, the three powers finally filed another formal complaint at the WTO against China about its restrictions on exports of REEs.

The WTO ruling is expected in the first half of 2013.

But the EU also has become wary of antagonising China over trade policies at a time when it is lobbying for Chinese money to ease the European debt crisis and when Europe’s total imports of rare earths have decreased by 43 per cent in 2012 compared with 2011.

The EU needs to focus not only on China’s near production monopoly of REEs, but also on its monopoly capacity to refine and alloy the REEs to produce industrial components and commodities.

Dr Frank Umbach

Dr Frank Umbach is a Senior Associate and Head of the Programme 'International Energy Security' at the Centre for European Security Strategies (CESS) GmbH, Munich-Berlin and Associate Direct ...

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