22_ Future

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Rare earth minerals like zhonghuacerite are used strictly in small amounts. Nowadays, however, they are indispensable for future industries and electric products like batteries, turbines and motors.

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The world of raw materials – reserves, market and future Guest article from the German Federal Institute for Geosciences and Natural Resources

Future_ 23

M any of us are still of the opinion that “raw materials are simply

there for the taking.” Only little by little is the public discussion

getting through to us: Questions arise as to what we need them

for? As to their limits. And regarding the fact that they are accessible at only a

few points on earth. The term ‘raw materials’ covers a broad range: They are,

for one, the sources of energy that are crucial to our basic needs – for the

preparation of food, for heating and for getting around. They’re the stones

and earth we use to build our houses and roads. Or the metallic raw materi-

als we need to make cars, bikes, household appliances and other things. And

last but not least, they are also the high-tech metals like lanthanum, euro-

pium, neodymium and the 14 others indispensable for electric products like

batteries, turbines and motors. These are raw materials that form the basis

both for our industrial production and the highly developed infrastructure –

in short, for our high standard of living. But will we have sufficient raw

materials in the future? Will the coming

generations have enough in the way of

development possibilities or will we leave

them a plundered planet? Can technical

progress improve our supply situation?

These are all questions the experts of

the Federal Institute for Geosciences

and Natural Resources deal with. The

first few answers:

Raw material reserves

for generations

Earth is a closed system, and in a closed

system raw materials are limited, of course.

These include basics like gravel, sand or salts

and energy sources like petroleum, natural gas

or coal. To be sure, data on how much we are

using at the time indicate that global raw material

reserves will hold out for some time to come. Solely with respect to petro-

leum are the scenarios different. Even if we find additional mineral depos-

its, develop improved technology and reduce what we consume, unlimited

supplies of this key energy source are likely to extend just one generation

into the future. In ten to fifteen years, we shall already have used up half

of the petroleum we can get at on Earth. On the basis of their findings,

researchers predict there will be difficulty meeting the demand – at least

for mineral oil. However, raw material inventory levels are determined not

solely by deposit geologists’ estimates of documented reserves. Techno-

logical developments and the situation on the raw material markets also

impact on availability.

Raw material prices

The price development on the international raw material markets basically

reflects the global business cycle. In line with past economic cycles, prices

for energy feedstocks, mineral raw materials and rubber dropped greatly in

the course of the latest financial and economic crisis. In some cases prices

plunged 70 per cent. Whereas oil was priced at around 146 dollars a barrel in

mid-2008, by the end of that year the barrel price dropped

to as low as 40 dollars. Triggered by rebounding financial

markets, demand for raw materials has surged upward

again since 2009. And with demand, raw material prices

also rose: In the time span January 2009 to August 2010,

for example, industrial metals futures soared by up to

126 percent and for petroleum 78 percent.

A host of factors will impact raw material prices in

the upcoming years. The rise of emerging coun-

tries – especially the BRIC countries (Brazil, Rus-

sia, India, China) – will have a big say in what hap-

pens to demand for raw materials in the next few

years. It may well take years, and probably even

decades, until a certain saturation has been

reached. Even the needs of countries like India

are only very slowly moving into the focus of

the western world. To build up and expand their

infrastructures, the emerging markets – the rapidly

developing countries with billions of people – require many,

many more raw materials than the existing industrial countries. This props

up prices on the global raw material markets. In the long run they make basic

commodities more costly.

Other significant factors in an eco-friendly, climate-neutral age: Forward-

looking technologies have a major impact on raw material demand. These

24_ Future

In this way, too, we conserve our limited raw material reserves. It also extends

the service life of the products made of recycled materials. Innovations lead to

a better yield and thus to an increase in our raw material stocks. These include

the use of more powerful extraction and conveyance tools, more efficient

operating sequences and optimized dressing and smelting technologies.

But still another resource needed in supplying society with the raw materials

required to maintain our present standard of living is available in unlimited

amounts: human creativity! It has always found solutions to problems that

crop up and will continue to do so in the future! <<

The BGR is a specialist agency of the Federal Ministry of

Economics and Technology (BMWi). It is the central research

and technical institution advising the federal government in

all geological matters. The institution is the major geoscien-

tific competence centre in Germany. Its core topics are en-

ergy feedstocks, mineral raw materials, groundwater, and

soil and the substratum as storage area and room for indus-

trial exploitation. It has the job of maintaining or improving

conditions of life. It does this by engaging in research and

advising for more prudent use of geo-capabilities.

At the request of the BMWi, the BGR founded the German Nat-

ural Resources Agency as a constituent unit in 2010. It aims to

develop conceptional economic approaches for dealing with

natural resources. It also supports German industry in assur-

ing supplies of feedstocks. It does so both on the basis of

research and ongoing market analyses and by advising those

in politics and business over a wide range of related topics.

Federal Institute for Geosciences and Natural Resources (BGR) in Hanover

include the expansion of regenerative wind and solar power energies or the

development of electric drives for cars.

The mood on the raw material markets is split on the supply side. On the one

hand, some raw materials have more than doubled in price since the begin-

ning of 2009. This is due to the upswing in global business and to the huge

demand from China. On the other hand, credit remains very tight for high-

risk investments. This affects the exploration and mining sectors. It results

in liquidity shortages for development of projects in this sector. Numerous

exploration projects were put on ice during the economic crisis. With the eco-

nomic outlook uncertain, there has been no rush to resume them. Present

data hints that the 2008/2009 economic crisis only briefly interrupted the

raw material boom in the years 2003 to 2008. Raw material supply continues

to limp behind global demand, though.

These are thus times of rising delivery and price uncertainty. Industries

that process raw materials will thus adapt their long-term procurement

strategies to ongoing market developments. They may have to diversify

their supply sources.

Technology and progress

Thanks to the latest developments in exploration technology, teams are

still today discovering raw material deposits. These are of the most diverse

nature and of nearly every magnitude. Locating and prospecting require a

bigger effort all the time, though. In hunting out new mineral reserves, geo-

scientific institutes and mining companies are constantly upgrading their

model concepts. These serve to describe how the deposits came into being.

The institutes draw, moreover, on ever more refined geophysical processes.

Remote sensing of the Earth by means of satellites has proved to be the key

tool for deposit geologists. It gives them a look at geographic areas unknown

to date, like the polar regions, that open the door to new raw material poten-

tial for the future. Continental shelf regions, their edges and the deep sea are

other areas that still harbour many a possibility never dreamt of before.

What is more, there are constant developments in the raw material industry’s

existing technologies. These are improving raw material utilization options

from an economical and ecological viewpoint. This includes the ongoing opti-

mization of scrap use and the maximum possible recycling of consumer goods.

Future_ 25

Natural rubber is obtained mainly from plantations in Asia. These pallets at importer Weber & Schaer’s warehouse in Hamburg hold rubber destined for ContiTech.

Treasured raw materials …

Loaded with goods and raw materials from around the world, thousands of container ships pull into the port of Hamburg every year

... the life blood of industry ContiTech tackles the challenges on the raw material market

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Raw materials are among the most valuable riches. At the same

time, they are some of the Earth’s mightiest sources of energy.

Raw materials are for industry what water is for humans: a life-

or-death commodity. There is an immense need for industrial raw materi-

als like petroleum and natural gas, metals, rare earths, minerals, stone and

rubber. Just the raw materials cited account for over a third of all goods

traded in the world! The guest article from the Federal Institute for Geo-

sciences and Natural Resources in this issue of CTi describes the enormous

dynamics of this market. ContiTech constantly faces up to such changes.

The company’s compound specialists are challenged to ensure quantities

and qualities over the long term. In this endeavour, they have to deal with

volatile market trends and ongoing changes in technical requirements.

ContiTech confronts these challenges with a long-range supplier concept.

The ultimate goal is to always supply the customers the high product quality

they are used to as quickly as possible. Dr. Peter Scholtissek, general man-

ager at ContiTech compound specialist Phoenix Compounding Technology

(PCT), succinctly describes how everything hangs together: “Raw material

availability and quality are the absolute criteria of success. Without suffi-

cient and, above all, good raw materials, there is no good compound. And

without a good compound, there are no good products.”

Raw material deployment at ContiTech

Paul Bocuse, one of the 20th century’s top chefs, received three Miche-

lin stars an incredible 44 times in a row. In his standard cookery book

he writes: “In short, skilled craftsmanship and knowledge of the methods

are what count for success in preparing a dish. The selection of products

on the market seems to me to be just as crucial.” What counts for the

star chef also plays a key role in the making of outstanding rubber prod-

ucts: the ingredients themselves and what the market offers for sale. The

ContiTech compound specialist’s supply cupboards contain around 800

different raw materials of varying types. On the basis of decades of expe-

rience, ContiTech’s adept specialists mate them to form the best possi-

ble combinations with the requisite properties for a wide range of appli-

cations. The compound specialists have a stock of over 2,000 different

formulas for this purpose. This opens the door to an incredibly wide range

of applications. The developers’ unique know-how and expertise gives rise

to such diverse products as cables and seals for the electrical industry,

durable waterproofing roofing membranes for the construction indus-

try, robust tyres for cars and trucks, safe hoses for use with foodstuffs

or even under the demanding conditions 2,000 metres under the sea.

But all raw materials are not the same. “We take a close look at the qual-

ity of the individual raw materials from the various suppliers,” explains Dr.

Uwe Maaß, head of the raw material department at Phoenix Compounding

Technology. “There is a clearly defined requirements profile for every single

raw material. Keep in mind that in cooking, butters are not all the same.

And at times it’s lard that makes for better taste. So, the right raw material

purchase is extremely important for our compounds.”

Sensitive buying market

Manufacturing rubber products is real team work and begins with raw mate-

rial purchases. The team draws a vital part of its strength from a close,

long-term partnership both with the customers as well as with raw mate-

rial suppliers. “Our success is largely dependent on offering our customers

compounds of a consistently high quality for years on end. 90 per cent of our

customers maintain a prolonged relationship with us. This, in itself, indicates

that the cooperation is working out very well in the areas of raw material

procurement and compounding,” underscores Peter Scholtissek. >>

The Alte Süderelbe railway station in the port of Hamburg is Europe’s largest container terminal

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In close collaboration with the parent company, Continental AG, ContiTech

basically purchases the specialities needed for the compounding centres

globally. But just as chefs generally prefer regional suppliers and dealers,

ContiTech, too, increasingly relies on regional raw material sources. “Our sup-

plier base is global, but we do give preference to regional sources when the

fact of their being close to our production plants offers advantages,” notes

Yvonne Polaster, head of raw material purchasing for ContiTech at Continen-

tal AG. At the moment raw material purchasing is still heavily concentrated

on Europe – especially in the case of deliveries from the chemical industry.

But Asia, already the main producer of natural rubber and high-grade syn-

thetic rubber types, is quickly catching up in further raw material sectors.

In view of the growing number of ContiTech locations, the limited delivery

capacity for raw materials, and, last but not least, ecological considerations,

short transport routes are essential. That is why ContiTech is expanding its

global supplier base by adding appropriate regional sources – above all in

the so-called BRIC states. The company is, moreover, building up compound-

ing centres in its markets with associated R&D departments. Examples of

this are the location in Mexico and, in short, in China and Brazil as well.

All told, more than 200 suppliers satisfy ContiTech’s raw material needs. Chefs

and compound specialists also have in common that both attach a lot of value

to the quality of the goods and to the consistency of their manufacturers. “We

have drawn up a comprehensive catalogue of standard requirements for our

suppliers. These also contain all-inclusive quality standards. In the interest

of our customers, we work solely with companies certified to ISO 9000. We

likewise make a point of demanding social and environmental standards from

Dr. Uwe Maaß, Dr. Klaus-Wolfgang Jacobsen, Dr. Peter Scholtissek and Dietmar Flemming at ContiTech Phoenix Compounding Technology’s raw material warehouse

Future_ 33

Current figures compiled by the International Rubber Study

Group (IRSG) show that annual worldwide rubber production

and processing is up by more than 25 million metric tons or

so. With a share of around 60 per cent, synthetic rubber domi-

nates the market. But natural rubber has been gaining ground

in the last few years. In those many sectors of industry in which

dynamic processes like vibration play a major role, the specific

properties of natural rubber are unbeatable. Natural rubber

grows only in tropical latitudes, mainly in Asia. The latex milk is

harvested by hand. It must then be processed and transported

to regional ports as quickly as possible. From there it begins

its roughly six- to ten-week trip to Europe, for example. Via the

major ports in Southern and Central Europe the material then

makes its way to rubber specialists like ContiTech.

Rubber’s long journey

our suppliers worldwide. Our purchasers and more than ten specially trained

assessment specialists run audits on site to verify that the suppliers com-

ply with these standards,” explains Yvonne Polaster, purchaser for ContiTech

at Continental AG. Raw material quality is a crucial

criterion for the compound specialists. Continental

AG maintains a separate department for supplier

development. To establish long-term partnerships,

it supports, but also challenges, existing and poten-

tial suppliers in terms of plant and product devel-

opment. We likewise do so in commercial matters

such as packaging, pricing and cost optimisation.

The raw material market itself is subject to drastic

price fluctuations. World market prices act like a

business barometer. They keep people informed of how the globe is faring

economically. “We work in an extremely dynamic market. Short- and long-

term factors are influencing and changing it all the time. This is especially

true for the rubber market,” emphasises Dietmar Flemming, raw materials

purchaser at ContiTech Phoenix Compounding Technology. During the finan-

cial crisis, prices for rubber were in free fall. But in 2010, according to the

Hamburgisches WeltwirtschaftsInstitut (HWWI), it recorded one of the steep-

est price hikes of all. Current developments – like the devastating earthquake

disaster in Japan in March – always have a direct impact on the price struc-

ture, however. The prices for natural rubber on the futures market dropped

from five to four U.S. dollars in a matter of just three days. The price of oil also

has a major impact on how prices develop on the rubber market. ‘Black gold’

is the primary material for synthetic rubber. Spikes in the price of petroleum

inevitably boost the cost of buying the chemically produced base material for

plastics. “In such a market there is a demand for future-oriented and creative

supplier concepts. Like our customers, we, too, attach great value to a close

relationship to our suppliers. Over the long run this benefits both partners,”

adds purchasing specialist Yvonne Polaster.

Search for alternatives

The highly erratic nature of raw material prices triggers an intensive search

for alternatives. Aspects like health protection, environmental impact and

sustainability play a bigger role all the time. There is likewise the fore-

shadowing effect of long-term trends, like dwindling petroleum reserves.

In the coming years and decades, this will move industries to persist in

looking for new material sources. They have to develop substitutes and

optimise recycling methods. In many cases they are pursuing wholly new,

unorthodox approaches. A research group from the University of Münster

is currently working on extracting rubber from the plain old dandelion. The

latex of the blowball could cover an estimated ten per cent or so of the

German rubber requirement. PCT general manager Dr. Peter Scholtissek

indicates what’s up ahead: “Many such projects

are still in a very early stage of development; but

now we see things happening in this area. We our-

selves have very successfully worked on putting

natural oils from renewable plants like linseed oil

to use. Our search focuses on ingredients that

have the same effect in much smaller doses than

we use at present. I should like to underline one

thing here: What sets us off from the others is that

we at ContiTech have the know-how to transform

new raw materials into real products. Just like a

star chef who is capable of repeatedly creating new taste sensations from

the ingredients at hand.” <<

Contact: Dr. Peter Scholtissek, peter.scholtissek@comp.contitech.de

“Without good raw materials, there is no good compound.

And without a good compound, there are no good products.”

Dr. Peter Scholtissek, ContiTech Phoenix Compounding Technology