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Raw materials - challenges and solutions for the future?
Peter KunzeDirector Environmental Policy
US-EU workshop on mineral raw materials data
Brussels, 12 September 2012
ACEA represents the whole European auto industry
16 major international companies
29 associated national organisations
An industry crucial for economy…
… and employment
12.6 million direct and indirect jobs
17.7 million vehicles
produced in 2011
Over €26 billion in R&D spending,
largest private investor
€72.6 billion of net trade contribution
€413.7 billionof tax revenues
(EU 15)
The “engine” of Europe
Raw Materials in the EU
EU dependent on RM from outside– First of all ensure free trade of primary and
secondary raw materials– Maintain global competitiveness of European
Industry
No region is self sufficient– EU unilateral actions are to be avoided in
global commodity markets
Do we really have a new raw materials problem and if yes, what is the solution?
Raw Materials dependency & sustainability impacts
No geological scarcity of raw materials
„Given that only a few percent of the Earth’s surface and subsurface have been explored in detail, the potential for discovering new mineral deposits is vast […] the main issue concerns […] sustainable exploitation of resources, rather than geological scarcity.“
Main challenges for EU businesses incl. Automobile Industry
Ensuring social and environmental standards in global supply chain– Missing governmental support / no level
playing field
Price increase– Increase in demand from emerging countries– Speculation on financial markets– Oligopoly, export restrictions
Supply risk of certain critical materials– Discontinuation of mining activities
Raw materials depletion? A myth
Certain natural materials are not exhaustible but production is concentrated in oligopolies– limited no. of companies (see iron ore) or countries
New mining activities to re-open in next 5 years– Reduced pressure on supply dependence (and price)
Example of a raw materials risk management system (1/2)
Developed in cooperation with the German Federal Institute for Geosciences and Natural Resources
Cash costsSupply and demand
Market supply
Stocks
Utilization ratio of refinery / mines
Geostrategic risks
Geographic distribution / country-specific risks
Market power
Company concentration (oligopoly)
Supply and demand trends
Exploration
Invest
Market supply scenarios
35 %35 %
1. 2. 3. 4. 5.
Goal: Identifying price and supply risks
Example of a raw materials risk management system (2/2)
Lithium Cobalt
Observe status of exploration projects
Diversification of suppliers
Long-term supply contracts
5. Supply and demand trends
1. Supply and demand – current status
Indicator
Hedging
Strategic recommendations
4. Market power
3. Geostrategic risks
2. Cash costs
Neodymium
criticalmoderateuncriticalAssessment scale
xx
x
xx
x
xx
x
Different measures to reduce the supply risk of a raw material need to be tailored
Focus: electric vehicle
Raw materials prices
Price trends for components of an electric vehicle
DysprosiumNeodymiumCopperManganeseNickelCobaltLithium
Raw
mat
eria
l cos
ts fo
r EV
-spe
cific
co
mpo
nent
s [U
S $
]
Incentive for research to find substituting materials
Critical issue if there is a sudden resource supply disruption (export limitation) or sudden price explosion (speculation)
no time for market to react
Resource issue has only three challenges for Policy:
1) controlling speculation and 2) enforcing WTO rules 3) avoid oligopoly in supply (or recycling)
Impacts of increasing raw materials prices
Recycling is important part of the solution, but
– Already in place for automotive (end of life directive 2000/53/EC)
– Takes place, irrespective of legislation, as the right market signals are in place, i. e.
Cost of recycling < resource price
Resource prices increase recycling go up
Subsitituion
prices go down
– Is not the silver bullet
– Will not solve near-term supply challenges
More Recycling? - I
Life span of vehicles is 10 – 15 years or even more
First significant volumes of EoL electrical vehicles for recycling will come around 2025-2030 (earliest)
I.e. Cobalt and rare earth needed for e-mobility
Increase in material demand around 2015-2020
Even 100% recycling rates could not help supply
2025-2030 new battery generations based on other materials
Demand of Cobalt, rare earth etc. for EVs
Highest possible supply of recycled rare earth etc. for EVs
EV life timetime
Vol
ume
Battery innovation
More Recycling? - II
Research and development
– Continuous substitution efforts
Highest rates of all complex articles
– Automotive products and production are already highly eco-efficient
Material information along global supply chain
– global IMDS system
Sustainable supply chain management
Raw materials supply risk assessments
What is the Automotive industry doing?
Secure, fair, long term and affordable global access to raw materials needed– Use bilateral and multilateral agreements to
remove export restrictions (primary/ secondary materials/waste), avoid oligopoly
Substitution and reduction of critical raw materials– Strategic EU investments in R&D&I
Different measures need to be tailored to reduce raw materials supply risks
Stop speculation on the financial markets
Fostering sustainable supply from EU sources
Conclusions (1/2)
Automotive products and production are already highly eco-efficient– Automobile industry will continue to further
improve efficient and responsible use of resources
Market forces have driven always OEMs to become more resource efficient– e.g. rocketing resource prices for certain
metals
Regulation is only needed when market is not working– this is not the case for automotive products!– Part of price increases shows market works
Conclusions (2/2)
