Strategic: the new critical in shaping the raw materials strategy

15 Nov 2022

By George Karkampasis, Senior Manager Regulatory Affairs – Circular Economy & Raw Materials

It is hard to escape the reality that over the last two decades Europe has bounced from one crisis to the next. To avoid another raw materials crisis, we need to learn the lessons from the current conflict in Ukraine, and already act on the warning signs.

For several years the European aluminium industry has existed between two parallel realities.

In the first, aluminium has become more and more important to the EU’s green and digital transitions. A recent study shows that European aluminium demand for clean technologies alone will increase from 14 million tonnes in 2020 to 21 million tonnes in 2050, with electric vehicles, solar power, and electricity networks as the main growth drivers.

In the second, the EU’s capacity to produce, keep and recycle aluminium has been undermined by supply chain disruptions, high regulatory costs, and the constant rise of underpriced, high-carbon imports from China. Data shows that European raw material sectors, and above all the aluminium industry, are particularly exposed to unfair trade practices.

As a result, the European aluminium industry has lost 30% of its primary production capacity between 2008 and 2021 alone, despite having a carbon footprint of only one-third of the Chinese average. We expect to lose another 1.1 million tonnes of primary aluminium production capacity in the EU by the end of 2022 due to the devastating impact of energy price inflation that is hitting Europe harder than any other region. Our continent’s overdependence on Russian energy imports is one reason for that. The EU’s unique energy market design is another one.

Europe’s recently announced raw materials act comes at a time when Europe is close to a tipping point at which the full aluminium value chain will no longer exist within the EU – just like other former industrial strongholds such as the European magnesium or solar industry.

To transform the idea of a Critical Raw Materials Act into a future-proof instrument that will enable the twin transition while securing raw materials for Europe’s socio-economic fundaments, the long-awaited policy tool must prioritise securing strategic and critical raw materials alike. It must implement an ambitious industrial policy (including European trade defence measures) capable of fostering Europe’s domestic raw materials value chains while providing for a holistic supply chain strategy, including supply diversification, to guarantee a viable and uninterrupted supply of raw materials.

The Critical Raw Materials Act is undoubtedly an important step towards sustainable growth and strategic autonomy in raw materials. The objective: “to ensure an adequate and diversified supply for Europe’s digital economy as well as for the green transition – and prioritise re-use and recycling”.

However, Europe’s understanding of raw materials security is still too focused on rare earths and reducing import dependencies. The Act must therefore lay out a solid policy fundament for mapping, monitoring and incentivising Europe’s raw materials needs in virtually all relevant economic ecosystems – from green technologies such as solar modules, electricity transmission or batteries to societally critical sectors such as energy-efficient buildings, mobility, defence or food and medical packaging.

Strategic must become the new critical

Based on today’s classification method, aluminium is not considered to be critical; and whilst Europe is increasingly becoming import-dependent on aluminium products, this is considered to be manageable. But, as with oil and gas, the warning signs already exist in relation to aluminium.

Our import dependency has increased dramatically, just as its importance to the digital and green transitions increases. This should worry far-sighted politicians.

To ensure we do not, once again, sleepwalk into another raw materials crisis we need to rethink our understanding of what makes a critical raw material. We need a classification that better captures the strategic role of raw materials, including aluminium, to Europe’s industrial agenda and our digital and sustainable future. And this needs to recognise the variable and dynamic nature of the market, and that these materials are geo-political tools that can be used against Europe’s sovereignty and security.

Beyond ensuring Europe’s continued access to strategically essential raw materials, such as aluminium, Europe’s raw materials legislation should also be used to facilitate the recovery of valuable Secondary Raw Materials (SRMs) and incentivise their use in Europe. Promoting measures to increase the efficiency of collection, sorting and pre-treatment of SRMs, such as aluminium scrap, should be at the forefront of this initiative. The benefits of a sound circular economy are obvious: Recycling aluminium scrap only requires 5% of the energy needed for primary aluminium production – so increasing recycling is an excellent way to minimise our industry’s dependence on energy and increase Europe’s own supply capacities.

Let’s learn the lessons and make sure that we don’t sleepwalk into another raw materials crisis.

Our latest posts