CBMM Critical Raw Materials Report Issue 1 16June11

Report on the European Commission’s

Critical Raw Materials Strategy

Draft

165th June 2011

Commercial in confidence

Report submitted to Companhia Brasileira de Metalurgia e

Mineração by Beta Technology

Strictly confidential to Companhia Brasileira de Metalurgia e Mineração and Beta

Technology Limited

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Strictly confidential DRAFT

Report on the European Commission’s Critical Raw Materials Strategy

For:

Tadeu Carneiro, Chief Executive ([email protected] )

Marcos Stuart, Technical Director ([email protected] )

Companhia Brasileira de Metalurgia e Mineração

Avenida das Nações Unidas, 12.901, 23º andar - Torre Oeste

Brooklin Novo, São Paulo – SP, CEP – 04578-910.

Prepared by Richard Wrigley Signature:

Date: 16th June 2011

Contact:

Richard Wrigley

Managing Director

Beta Technology Ltd

Barclay Court

Doncaster Carr

Doncaster

DN4 5HZ

UK

Tel: +44 (0) 1302 322633

Fax: +44 (0) 1302 388800

Email: [email protected]

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mailto:[email protected]




Website: www.betatechnology.co.uk

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http://www.betatechnology.co.uk/


1. SUMMARY RECOMMENDATIONS AND DISCUSSION POINTS

The European Commission (EC) is working to ensure, as much as it is able, that Europe’s

industry has access to the raw materials necessary for it to continue to grow and develop.

This stance is in common with other nations including the United States of America and

Japan. This has been, in part, initiated through the trading stance taken by China on its

control of the rare earths that it mines.

Niobium is one of 14 critical raw materials that have been identified by the EC as being

essential for the competitiveness of European industries. Niobium is a key component in

high performance steels used in a range of applications including line-pipe and automotive.

The main source of niobium is from outside Europe (Brazil), and from one commercial

company CBMM (Companhia Brasileira de Metalurgia e Mineração), which also influences its

status as ‘critical’.

The EC strategy on critical raw materials has identified the following generic options for

mitigating the risk for supply:

i. Political trade agreements.

ii. Development of substitution materials.

iii. Recycling of products within the EU.

iv. Exploration of new materials sources ideally within the EU.

Implementation of this strategy could influence the market demand for niobium within the

EU. Policy makers are already developing research programmes to identify substitution

options for the 14 critical materials. This is a long term issue which CBMM needs to address

to reduce the impact of this evolving EC policy on its future growth.

This report outlines the current policy positions of both the EC and UK Government and how

they intend to address the critical raw materials issue, through analysis of policy documents

and meetings with key officials. Based on the intelligence gathered, we recommend the

following key points for consideration by CBMM:

i. The need to develop relationships with policy makers and trade officials

in Europe and Brazil.

ii. Communicate key messages about niobium and CBMM effectively to

policy makers by increasing the relevance and amount of publically

available information.

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iii. Understand better the risk(s) that the EC critical raw materials policy

may or may not have on CBMM’s growth strategy.

iv. Consider increased participation by CBMM in European research and

development projects (public and privately funded) to access new

knowledge and raise the profile of CBMM outside its current technical

network.

To begin implementing the recommendations we have identified a number of short and

medium term actions which are listed in the table below.

Activity: Action by:

Invite EC representatives to the Charles Hatchett seminar in

July 2011

Richard Wrigley

(invitationes have already

been sent)

Organise meetings with additional EC and UK Government

policy officials (e.g. EC trade representatives)

Richard Wrigley

Provide CBMM with relevant contacts in Brazil who engage

with EC and UK policy officials

Richard Wrigley

Review current public information on niobium and CBMM, and

make recommendations on appropriate messages and

additional requirements to inform and influence policy

makers

Richard Wrigley

Ensure the CBMM video currently in production includes some

key messages about niobium and CBMM, to inform and

influence a non-technical audience (including policy makers)

Jayne Evans

Provide support to CBMM’s Niobium Development Programme

to translate research results and communicate them to a

non-technical audience, including policy makers, to further

promote CBMM’s technical and environmental credibility

Richard Wrigley / Richard

Ball Marcos Stuart

Identify opportunities for CBMM to participate in relevant

European research and development projects

Richard Wrigley

Provide regular technical reviews on European research

projects addressing substitution options for niobium

Richard Wrigley

Provide feedback directly to the EC via the current public

consultation on a possible Innovation Partnership on Raw

Materials

Richard Wrigley

(consultation closes on 20th

June 2011)

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We propose a short meeting, lasting no longer than one hour, is arranged at an appropriate

point during the visit to London in July by CBMM, to provide an update on the activities listed

above.

CBMM already has a well-established mechanism of working with its supply chain through to

the OEMs in all its main sectors of operation: automotive, line-pipe, construction and

shipping. The approach has an ‘Open Innovation’ culture allowing the supply chain to

develop new and innovative products that use increasing amounts of niobium. This is

generally achieved through personal relationships.

The interaction with policy makers is less obvious and perhaps not a focus for CBMM as it

has been less of a requirement. The international focus on critical raw materials and the

report generated by the EC has raised the issue of informing and influencing increasing

awareness at a governmental level. This includes providing publically available information

via appropriate channels (e.g. CBMM website), tailored to the needs of a non-technical

audience. This will inform desk based researchers and could ultimately influence key

decision makers. This information needs to be augmented by personal relationships in the

EC and within other influential governments, including Brazil.

There is also a growing emphasis on instigating research and development to reduce the

impact of critical raw materials on European industries including substitution, mining and

recyclability. This presents an opportunity for CBMM to become involved in informing

European policy via participation in research projects. This will help to reinforce the current

understanding of the benefits of niobium by policy makers and the potential to reduce its

‘critical’ status.

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2. EUROPEAN POLICY

In 2008, the European Commission (EC) launched its ‘Raw Materials Initiative’1, an attempt

to ensure European industry’s access to resources from within and outside the European

Union (EU) and to address Europe’s vulnerability related to reliance on imports of raw

materials. This vulnerability was identified as stemming from increasing demand for

materials, particularly from emerging economies, the inherent scarcity and uneven

concentration of certain materials, and concern over measures designed by countries to

protect their reserves of resources.

In June 2010, an Expert Working Group convened under the auspices of this initiative,

published a report identifying materials that are critical to the EU2. The report analysed a

selection of 41 minerals and metals and listed a total of 14 critical materials. Specifically,

the report highlights Europe’s dependence on importing ‘high-tech’ metals which play a

critical role in high value manufacturing, including energy efficient and innovative green

technologies.

The methodology adopted by the Expert Working group to identify the 14 critical raw

materials is based on a relative concept of criticality. This means that the raw materials are

labelled ‘critical’ when the risks for supply shortage and their impacts on the economy are

higher compared with other raw materials. Two types of risk are considered:

Supply Risk, taking into account the political-economic stability of the producing

countries, the concentration of production, the potential for substitution and the

recycling rate.

Environmental Country Risk, which assesses the risks from measures taken by

countries with the intention of protecting the environment and by doing so

endangering the supply of raw materials to the EU.

The 14 critical materials are those falling within the top right cluster of the diagram in Figure

1. This is due to their high relative economic importance and high relative supply risk.

Significantly niobium falls well within this cluster:

Raw Main producers Main sources of Import Substitutab Recycling

1 Commission of the European Communities, The raw materials initiative – meeting our critical needs for growth and jobs in Europe, (COM(2009)699) Final, Brussels, 04/11/2008.

2 Critical raw materials for the EU, Report of the Ad-hoc Working Group on defining critical raw materials, European Commission Enterprise and Industry, European Commission, June 2010.

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materials

(2008, 2009) imports into EU (2007, or 2006)

dependency rate

ility rate

NiobiumBrazil 92% Brazil 84%

100% 0.7 11%Canada 7% Canada 16%

Note: The substitutability index for a specific raw material is an aggregate of substitutability indices for each of its uses.

It is at the level of each use that substitution has been evaluated for each raw material. Four values have been given

"on the basis of expert opinion" by Fraunhofer ISI to measure the various degrees of substitutability: a value of 0 would

mean that substitution is possible at no cost; 0.3 means that substitution is feasible at relatively low cost; 0.7 means

that substitution is possible at high cost; and 1 means that substitution is not possible or very difficult.

Figure 1. Analysis of raw materials.

The EC published a further communication in February 2011 on what has been achieved and

lays out a plan to take the work forward3. This report re-iterated the concerns over recent

volatility in the commodity markets aligned with a series of changes in global supply and

demand patterns. The increase in demand for raw materials will be reinforced through the

continuing industrialisation of countries such as China, India and Brazil. The increase in

financial investment flows into commodity derivative markets has, amongst other factors,

led to increased calls for policy responses to mitigate the negative effects of such

movements on both producers and consumers. This is now receiving attention at the

highest political level including the G20 summits.

3 Communication from the Commission to the European Parliament, Council, the European Economic and Social Committee of the Regions, Tackling the Challenges in Commodity Markets and on Raw Materials, COM(2011) 25 Final, 2.2.2011.

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The report details an approach based on three pillars of activity (detailed fully in Annex 1),

to improve access to raw materials for Europe. These pillars are:

i. Fair and sustainable supply of raw materials from international markets.

ii. Fostering sustainable supply within the EU.

iii. Boosting resource efficiency and promote recycling.

3. UK GOVERNMENT POLICY

The UK Government House of Commons Science and Technology Committee published its

report ‘Strategically Important Metals’ on the 17th May 20114. The report addressed the

strategic importance of metals in particular the rare earth elements, and ‘those specialist

metals that are vital to the advanced manufacturing, low-carbon technologies and other

growing industries.’

From the evidence received by the Committee there is limited likelihood of most strategic

metal reserves running out in the foreseeable future. They believe that new technology,

alternative materials and the discovery of new reserves will ensure accessibility, but this

may have price implications. The main concern is about UK users having access to

necessary raw materials.

One of the interesting findings of the report was that they felt there is a lack of information

on the strategically important metals contained in finished and semi-finished imports. The

UK Government believes the UK’s focus should be on developing good design to minimise

resource usage and the development of recovery and recycling technology for these metals.

The UK Materials KTN (Knowledge Transfer Network) is a body established at “arms-length”

from the UK Government and is administered by a consortium including the IOM3 (Institute

of Materials Minerals and Mining). At their Annual General Meeting held on 18 May 2011 the

topic was ‘Combating Materials Scarcity’. The meeting addressed the issues of materials

scarcity, substitution, designing for dis-assembly, recovery and recycling, and processes for

minimal use of materials. The meeting tended to echo the UK Government report that had

been published the previous day, in that the UK emphasis is around design, recycling and

substitution.

4 House of Commons Science and Technology Committee, Strategically important metals, Fifth report of session 2010-12, HC 726. Published on 17th May 2011.

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The Materials KTN has also published a draft report in June 2011 entitled ‘A Study of the

Recycling and Recovery Infrastructure for Materials Critical to the UK’5. This includes a short

section on niobium which covers its background, applications, and recycling in the UK and

Europe.

5 A Study of the Recycling and Recovery Infrastructure for Materials Critical to the UK. Materials Knowledge Transfer

Network

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4. MEETING REPORTS

UK Materials AGM 18 May 2011

Richard Wrigley attended the AGM to understand further the UK’s approach on the raw

materials question. The UK had been in part stimulated into some action by the concerns of

Japan who had visited the UK in mid-2010 to discuss the impact of the Chinese approach to

controlling the supply of rare earths in particular.

The UK is very dependent on materials for growing its manufacturing sector. Renzo

Tomellini, Head of Materials Unit Directorate General (DG) Research, European Commission

presented at the event. He has a metallurgy background and spent some time at the Italian

Steel Research Centre. He made the following main points:

i. Products need to be sustainable and competitive.

ii. The use of more diverse range of different elements to deliver what we require.

iii. The need for alternative solutions.

iv. Further development of mining in Europe. This will involve going deeper and

developing new technologies. Also the increased use of robotics. The

development of a new mine takes about 8 – 12 years which is about the same

time to develop a material substitution route.

v. A European Innovation Partnership on Raw Materials will be established later in

2011 (see below).

vi. The European Framework Programme 7 (FP7) for research will contain call topics

associated with material substitution, mining and recyclability.

Note: Richard Wrigley has an on-going dialogue with Renzo Tomellini and he will be invited

to the Charles Hatchett Seminar on the 13th July.

One of the break-out sessions considered critical materials sourcing and substitution

strategies. The following points were made:

i. Manufacturers are forming partnerships with materials suppliers.

ii. The UK still has expertise in geology, mining and processing.

iii. New primary sources of materials need to be investigated.

iv. Substitution of critical materials needs to be developed.

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v. Some potentially viable quantities of niobium have been discovered in the South

West of England.

EC Directorate-General for Enterprise and Industry 9 June 2011

Richard Wrigley and Dr Richard Ball (Beta Technology Consultant) met with Paul Anciaux,

(Policy Officer Metals, Minerals, Raw Materials) to discuss issues around the EU report on

critical raw materials and how CBMM could support the EC in its work going forward.

Paul Anciaux coordinates the EC’s activity on the topic of critical raw materials. He works

closely with colleagues in other Directorate-Generals including Renzo Tomellini in DG

Research and Peter Klein in DG Trade.

Paul Anciaux clearly understood the topic and niobium, and was very pleased to have been

visited to discuss CBMM’s position. There is an openness to discuss the topic and listen to

ideas on the ways forward for Europe.

The main points that came out of the discussion are:

i. There are three pillars that support the EC’s strategy (Annex 1):

a. Fair and sustainable supply of raw materials from global markets

b. Fostering sustainable supply within the EU

c. Boosting resource efficiency and promoting recycling

ii. The current list of 14 critical materials is not limited to this number.

iii. Raw materials diplomacy with other countries, including Brazil, is a way of helping to

secure supply. The visit of European Commission Vice-President Tajani to Chile,

Argentina and Brazil on 9th to 13th June was highlighted. This should result in a signed

agreement between the EU and Brazil – Paul Anciaux indicated he would forward a

copy of the signed agreement when it is available.

iv. The issue of raw materials had been raised at an international level and was being

considered by the G20.

v. There is a need to exchange best practice around exploration.

vi. The EC is proposing to establish an Innovation Partnership across Europe on raw

materials. There is currently a public consultation on the proposal which closes on

20th June, which Paul Anciaux encouraged Beta to respond to6. Innovation

Partnerships are part of the EC’s Europe 2020 Strategy to support competitiveness

and innovation. These partnerships will be challenge led, will act across the whole

6 http://ec.europa.eu/enterprise/policies/raw-materials/public-consultation-ip/index_en.htm

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research and innovation chain, and thirdly will streamline, simplify and better

coordinate existing funding programmes and initiatives. The Board membership of

these partnerships will include high level representatives of Members States

(Ministers), members of Parliament, industry leaders, researchers and other key

stakeholders. This Board will be supported by operational groups, composed of

private and public sector experts, practitioners and users. The Innovation Union is

defined in a communication from the Commission in October 20107.

vii. The critical list of raw materials will be reviewed every three years. The process for

obtaining information on individual raw materials has so far been predominantly

using desk based research or publicly available information. There would be a new

activity commissioned in 2012 to start collecting new information and this may go

beyond purely desk based activity. Paul Anciaux did ask if there was an international

niobium association as a potential source of information.

viii. In terms of trade policy and arrangements between Brazil and the EU, then it would

be worth having a conversation with Peter Klein, Directorate-General Trade, Head of

Unit Industrial Sectors.

7 Communication from the Commission to the Europen Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Europe 2020 Flagship Inititive Innovation Union, SEC(2010) 1161, 6.10.2010.

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ANNEX 1

Three pillar approach to improving access to raw materials for Europe.

Pillar 1 Fair

and

sustainable

supply of raw

materials

from global

markets

The EU will actively pursue a "raw materials diplomacy" with a view

to securing access to raw materials, in particular the critical ones,

through strategic partnerships and policy dialogues. The EC intends

to reinforce the Raw Materials Trade Strategy so that the EU:

continues to develop bilateral thematic raw materials dialogues

with all relevant partners, and strengthen ongoing debates in

relevant fora (including e.g. G20, UNCTAD, WTO, OECD); carry

out further studies to provide a better understanding of the

impact of export restrictions on raw materials markets, and

foster a dialogue about their use as a policy tool.

further embeds raw materials issues, such as export restrictions

and investment aspects, in ongoing and future EU trade

negotiations in bilateral, plurilateral and multilateral frameworks.

pursues the establishment of a monitoring mechanism for export

restrictions that hamper the sustainable supply of raw materials,

and continues to tackle barriers distorting the raw materials or

downstream markets with dialogue as the preferred approach,

but using dispute settlement where justified.

encourages in OECD activities the inclusion of relevant non-

OECD members in the work on raw materials, and explore

further multilateral and plurilateral disciplines including

consideration of best practices.

use competition policy instruments to ensure that supply of raw

materials is not distorted by anti-competitive agreements,

mergers or unilateral actions by the companies involved.

Pillar 2

Fostering

sustainable

supply within

the EU

In line with the Europe 2020 Strategy, the EC will promote

investment in the EU’s extractive industries through:

defining a National Minerals Policy, to ensure that mineral

resources are exploited in an economically viable way,

harmonised with other national policies, based on sustainable

development principles and including a commitment to provide

an appropriate legal and information framework.

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setting up a land use planning policy for minerals that comprises

a digital geological knowledge base, a transparent methodology

for identifying mineral resources, long term estimates for

regional and local demand and identifying and safeguarding

mineral resources (taking into account other land uses) including

their protection from the effects of natural disasters.

putting in place a process to authorise minerals exploration and

extraction which is clear, understandable, provides certainty and

helps to streamline the administrative process (e.g. the

introduction of lead times, permit applications in parallel, and

one-stop-shop).

In the short term the EC proposes to assess with the Member States

the scope for increased synergies between national geological

surveys, that would allow for economies of scale, reduced costs and

increased potential to engage in joint projects (e.g. harmonised

minerals database, European Raw Materials Yearbook). In the

medium term, any synergies would contribute to an improved

European raw materials knowledge base.

Pillar 3

Boosting

resource

efficiency

and

promoting

recycling

The EC considers that higher recycling rates will reduce the

pressure on demand for primary raw materials. The EC will present

in 2011 a roadmap for a resource efficient Europe. It will set out a

vision of structural and technological changes required to move to a

low carbon, resource efficient and climate resilient economy by

2050 and how to make this transition happen through policies

delivering most benefits for the EU’s growth, jobs and energy

security.

The barriers which prevent recycling that the EC considers need to

be addressed fall into three broad categories: 'leakage' of waste to

sub-standard treatment inside or outside the EU; obstacles to the

development of the recycling industry; and inadequate innovation in

recycling.

The EC proposes therefore to:

review the Thematic Strategy on waste prevention and recycling

in 2012 to develop best practices in collection and treatment of

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key waste streams, in particular those which contain raw

materials with a negative impact on the environment. When

necessary, the availability of recycling statistics will be

improved.

support research and pilot actions on resource efficiency and

economic incentives for recycling or refund systems.

review the action plan on sustainable consumption and

production in 2012 to identify what additional initiatives are

necessary in this area;

analyse the feasibility of developing ecodesign instruments (i) to

foster more efficient use of raw materials, (ii) ensure the

recyclability and durability of products and (iii) promote the use

of secondary raw materials in products, notably in the context of

the Ecodesign Directive; and develop new initiatives to improve

the competitiveness of EU recycling industries notably by

introducing new market based instruments favouring secondary

raw materials.

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Documents

CBMM Critical Raw Materials Report Issue 1 16June11