cbmm critical raw materials report issue 1 16june11
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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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Report on the European Commission’s Critical Raw Materials Strategy
For:
Tadeu Carneiro, Chief Executive (CARNEIRO@cbmm.com.br )
Marcos Stuart, Technical Director (MARCOS.STUART@cbmm.com.br )
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: richard.wrigley@betatechnology.co.uk
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Website: www.betatechnology.co.uk
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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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