MINEX Forum

Tag: EU

  • EU Green Ambitions Under Siege Amid Red Sea Crisis, Russian Aluminium Ban Fears

    EU Green Ambitions Under Siege Amid Red Sea Crisis, Russian Aluminium Ban Fears

    The European Union has long positioned itself as a global champion of green energy and the world’s battle against climate change. No other region in the world has stricter environmental legislation or has done as much to promote renewable energy sources. Now, the EU’s commitment to the Green Deal is being rigorously tested in the wake of the Ukraine conflict and the anti-Russian sanctions it triggered, as well as the recent escalation in Israel and the Red Sea region.

    These developments are already reshaping the continent’s approach to climate change, particularly in the context of its traditional reliance on Russian aluminium, widely considered one of the most environmentally friendly options in the European market, especially compared to its less green alternatives from Asian markets.

    Despite geopolitical upheavals, most EU countries have actually intensified their renewable plans since 2020. The energy and COVID-19 crises, along with the war in Ukraine, have spurred the green transition in Europe rather than derailing it. EU countries’ climate policies demonstrate a significant shift towards renewable energy: it is now expected that 63% of EU electricity will be produced from renewables by 2030, up from 55% originally envisaged under the previous plan in 2019. This shift would mark a substantial decrease in EU fossil fuel-based power generation, projected to drop to 595 terawatt hours in 2030 from 1,069 TWh in 2021.

    The ambitious green transition is not a one-way street for Europe, however, as the movement is facing a pan-European challenge. Countries like Italy, the United Kingdom and the Netherlands have shown signs of pushback against various EU initiatives aimed at greening the economy. This resistance, termed “greenlash,” is driven by factors ranging from economic pressures to political dynamics. Italy, for example, has sought to water down certain EU directives. In the Netherlands, the rise of the BBB party, opposing the government’s environmental policies, signifies growing discontent with the green agenda. At the same time, Britain’s recent fossil fuel projects have also raised questions about its commitment to climate goals.

    With Europe on the brink of recession, it is increasingly hard to “sell” costly green initiatives to the dissatisfied voters who are already dealing with the daily pressures of inflation and rising geopolitical risks. The sanctions already imposed on Russia, historically one of Europe’s key trade partners, for its role in the Ukraine crisis have severely diminished bilateral commerce and to a large degree backfired against European producers and consumers.

    While the Ukraine crisis is quickly approaching its 2-year mark, the new geopolitical hotspot in the Red Sea is adding additional pressure on the strained European economy. The halt of navigation in what is one of the world’s most important transportation routes, representing roughly 12 percent of global container traffic, means increased time (by adding about 10 days to trip duration if an alternate route around Africa is taken) and costs for consumers. For Europe this translates into higher import costs for such key industrial materials as aluminium, as well as for energy.  Longer travel times also mean more environmental impact for EU-made products, undermining the continent’s green economy goals.

    Russian aluminium, considered a greener option due to its lower carbon footprint, still plays a significant role in Europe’s industrial and environmental strategies. The potential sanctioning of Russian primary aluminium – long favored by some EU politicians and pundits despite strong economic risks – poses a significant dilemma amidst these crises. Due to high energy and labour costs, the EU’s own aluminium production is in steady decline and now accounts for only about 11 percent of its total demand.

    Multiple sanctions introduced against the Russian economy have done nothing to force Russia to change its course on Ukraine. When considering whether to expand them to also include a ban on aluminium EU policymakers must be fully aware of the environmental impact of losing a key source of green aluminium that cannot be easily replaced.

    This underscores the importance of strategic foresight in policymaking to ensure that Europe’s green ambitions remain robust and responsive to an ever-changing global landscape. As Europe navigates through these turbulent times, the balancing act between maintaining its green agenda and responding to geopolitical developments becomes more challenging. The decisions made in the coming months will not only shape Europe’s environmental policies but also reflect its resilience and adaptability in the face of global challenges.

  • EU sets critical mineral goals, but faces struggle to hit them

    EU sets critical mineral goals, but faces struggle to hit them

    The European Union (EU) has set targets to dig up, recycle and refine lithium, cobalt and other metals it needs for its green transition, but a shortage of new money, crippling energy costs and local opposition could put them beyond reach.

    The bloc will likely need to find ways to trim demand, find substitute materials and forge partnerships that break China’s stranglehold on mineral supplies.

    The Critical Raw Materials Act (CRMA), due to enter force in early 2024, says the bloc should mine 10%, recycle 25% and process 40% of its annual needs of 17 key raw materials by 2030.

    The materials are essential for vehicle batteries, wind turbine magnets and other clean tech products the EU wants to manufacture. The CRMA aims to reduce the bloc’s reliance on China, which dominates global mineral processing and has already threatened EU supply with export curbs.

    Studies forecast recycling will be limited until 2035-2040, when metals re-enter the market as scrap.

    Researchers from Belgian university KU Leuven concluded in a 2022 report that the period to 2030 will be the most challenging for metal supply, highlighting risks for copper, lithium, nickel, cobalt and rare earth elements.

    The CRMA aims to speed up granting of project permits, which for a mine should be within 27 months, from a potential 10 to 15 years now, but other obstacles remain.

    Eurometaux, Europe’s association for non-ferrous metals, says Europe has potential, but needs cheaper energy and EU financing, pointing to funds on offer in the US, Canada or Japan.

    The EU has loosened state aid rules and plans to spend €3-billion ($3.3-billion) to boost battery production, but the sums are dwarfed by the $369-billion of green subsidies in the US Inflation Reduction Act. A European Sovereignty Fund has been mooted, but since dropped.

    Industry groups say prioritisation of US over EU projects by the likes of Nyrstar in gallium and germanium recovery and Jervois Cobalt in mining and refining highlights the gap.

    Meanwhile, higher EU higher energy costs have forced widespread idling of electricity-intensive metal smelters – EU aluminium production fell 35% in 2022 and has dropped further this year.

    EU has plans to reform its electricity market, but this will take time to guarantee affordable renewable energy.

    In mining, repurposing some existing sites might yield critical raw materials that were considered to be waste, according to Lawrence Dechambenoit, global head of external affairs at Rio Tinto, the world’s second-largest mining company.

    But for lithium, he said, Europe urgently needed new mines.

    Eurometaux says identified projects could meet almost 40% of EU supply by 2030, but a number are uncertain.

    These include Portugal, which has delayed auctioning of mining licences for battery-grade lithium and is now mired in a corruption scandal and Serbia, which revoked licences in 2022 for Rio Tinto’s $2.4-billion lithium project.

    Nicola Beer, the German liberal who steered the CRMA through the European Parliament, is more confident on the three targets.

    “I get calls from countries asking what they can do, which I take as a positive sign,” she said.

    However, she also points to what she calls the “fourth leg of the chair” – innovation to minimise material use or find substitutes. As an example, she passes round a black disc made from wood that can serve as graphite in batteries.

    One effective move would be a shift to more modest electric vehicles with smaller batteries. Julia Poliscanova, a senior director at campaign group Transport & Environment, says this could cut lithium and nickel demand by a quarter.

    Niclas Poitiers, research fellow at Bruegel think-tank in Brussels, says Europe’s ultimate aim of being a clean tech leader may be better served sourcing minerals from reliable allies and concentrating on higher-end products such as batteries, rather than ‘on-shoring’ mineral production.

    “The base of our wealth is that we focus in manufacturing the most value-added parts and we outsource the things that are not high value-added. And this is something that is very difficult to change,” he said.

    The CRMA does stress a need to diversify imports.

    The European Union has indeed signed multiple partnerships from Argentina to Zambia and hopes its 300 billion euro Global Gateway infrastructure investment scheme will entice resource-rich countries keen to diversify their economies and also reduce their own dependence on China.

    “It’s a win-win proposition,” Poitiers said.

  • Sustainable raw materials for green technologies

    Sustainable raw materials for green technologies

    Euromines President invited European Institutions and Automotive sector to jointly assess the realities of supply of raw materials to European manufacturers. His two statements summarize the past decade approach to raw materials in the EU: “For years Europe was far too complacent in outsourcing pollution – and receiving raw materials for our consumption in return” – and yet “Nowhere else mining is happening at such a high level of environmental protection as in Europe”.

    From the rare earth crisis in the beginning of the 2000s, to the magnesium, gallium and germanium graphite crunch today – the intervals demonstrating European vulnerabilities are becoming shorter. The resulting dependency creates pressure on political leadership in the EU. European Institutions seem to have acknowledged this threat to competitiveness of the European industry. After all, the same materials are critical to achieving Green Deal made in Europe with or values, industry and society. Only by including all these aspects the green transformation can be a successful role model to copy for other countries.

    In 1957, European leaders had the incredible foresight to make war economically impossible and eventually unthinkable. At the heart of it: integrating the production of raw materials across borders of countries, obliging them to work together. Across various economic crises, Europe calibrated a systemic prosperity and comfort by trading, finding allies and ensuring access to energy and non-energy commodities.

    Today EU faces yet another challenge: climate change and the required energy, consumption and production transition, shift the rules of the game to a new level of fierce competition. War has returned to Europe, and it is not a given that allies and rivals alike step in for what Europe decided to outsource. Such increasing exposure is a serious to our prosperity and innovation power to find answers to the gargantuan task of tackling climate change.

    ESG and geopolitical imperatives while maintaining prosperity will depend on a commodity transition: metals and minerals will fuel the planet. The demand increase for metals needed for goods such as e-vehicles and the infrastructure to make this work will be enormous – we cannot even fathom it. This requires bold steps in how we treat and use raw materials: not just specific in form of applications or technologies but systemic across value chains. After all, the sustainability impact of driving an e-vehicle depends on the sustainability performance of the raw materials it is made of.

    European mining emerges as a strategic linchpin for autonomy in green, digital, and defence sectors. It can provide the raw materials needed to make a wind turbine run and a battery to store this electricity, but also serve as a benchmark for ESG standards for imported materials.

    Europe is not alone.

    The EU’s Green Deal is not the only sustainability transition policy – the race for raw materials will intensify even more, scrambling to get access to the most promising deposits. Control over extraction rights and refining capacity will be the defining geopolitical challenge for the decades to come. Europe needs to reckon with this on three accounts:

    Utilize Europe’s Resources: Europe must tap into its promising deposits for critical and strategic materials, utilizing the knowledge and expertise of EU mining companies with minimal environmental impact.

    Build Sustainable Partnerships: Outsourcing to areas with lower regulatory requirements is not an option. Europe must engage in partnerships with allies willing to uphold high standards in environmental, social, and governance issues.

    Circular Economy Integration: Beyond recycling, integrating mining into the Circular Economy concept can minimize primary raw material extraction for other sectors.
    Redefining Raw Material Approaches.

    Raw materials should no longer be considered merely a procurement issue. Confirming this disparity in approaches is the fact that for many sectors, supply of raw materials is sixth or seventh tier on their demand list. Yet, without securing the premium for the ESG criteria in sourcing them, the rift between downstream manufacturing and upstream mining companies will continue to render supply chains fragile, prone to disruptions and impede sustainability and human rights standards.

    Extraction, refining, and manufacturing need to compete on more than “just-in-time” and cheapest prices. This behaviour change is a catalyst to do more in a sustainable way and be honest in how we source and procure raw materials to fulfil our own sustainability ambitions.

    Sustainability is not an externality.

    Internalizing high production standards in upstream and security of supply externalities in downstream industries must go hand in hand to recognize costs and benefits of a sustainable raw materials extraction. Mining as the base of many Green Deal objectives – if done right – decarbonizes entire value chains. LKAB’s pellets are 7 times less CO2-intensive than sinter production and key for decarbonized steel production. Boliden’s Aitik and Kevitsa mines are prime examples of mine electrification -providing low-carbon copper and zinc that are needed for electrification through increased deployment of fossil free electricity.

    The EU raw materials mining industry has all the elements ready – from deposits, environmentally friendly extraction processes to a world-class R&D ambition to further reduce the impact of mining and providing critical and strategic raw materials. To make this happen Europe must act now! The Critical Raw Materials Act is a paradigm shift politically recognizing the benefits of our own backyard. The momentum initiated with the CRM Act must not be slowed down. There is a lot to do if we are serious about our role in the global green transition – starting with the production of our daily-life consumption.

     

  • The Critical Minerals to China, EU, and U.S. National Security

    The Critical Minerals to China, EU, and U.S. National Security

    The Critical Minerals to China, EU, and U.S. Security

    Over the last decade, minerals like nickel, copper, and lithium have been on these lists and deemed essential for clean technologies like EV batteries and solar and wind power.

    This graphic uses IRENA and the U.S. Department of Energy data to identify which minerals are essential to China, the United States, and the European Union.

    What are Critical Minerals?

    There is no universally accepted definition of critical minerals. Countries and regions maintain lists that mirror current technology requirements and supply and demand dynamics, among other factors.

    These lists are also constantly changing. For example, the EU’s first critical minerals list in 2011 featured only 14 raw materials. In contrast, the 2023 version identified 34 raw materials as critical.

    One thing countries share, however, is the concern that a lack of minerals could slow down the energy transition.

    With most countries committed to reducing greenhouse gas emissions, the total mineral demand from clean energy technologies is expected to double by 2040.

    U.S. and EU Seek to Reduce Import Reliance on Critical Minerals

    Ten materials feature on critical material lists of both the U.S., the EU, and China, including cobalt, lithium, graphite, and rare earths.

    Despite having most of the same materials found in the U.S. or China’s list, the European list is the only one to include phosphate rock. The region has limited phosphate resources (only produced in Finland) and largely depends on imports of the material essential for manufacturing fertilizers.

    Coking coal is also only on the EU list. The material is used in the manufacture of pig iron and steel. Production is currently dominated by China (58%), followed by Australia (17%), Russia (7%), and the U.S. (7%).

    The U.S. has also sought to reduce its reliance on imports. Today, the country is 100% import-dependent on manganese and graphite and 76% on cobalt.

    After decades of sourcing materials from other countries, the U.S. local production of raw materials has become extremely limited. For instance, there is only one operating nickel mine (primary) in the country, the Eagle Mine in Michigan. Likewise, the country only hosts one lithium source in Nevada, the Silver Peak Mine.

    China’s Dominance

    Despite being the world’s biggest carbon polluter, China is the largest producer of most of the world’s critical minerals for the green revolution.

    China produces 60% of all rare earth elements used as components in high-technology devices, including smartphones and computers. The country also has a 13% share of the lithium production market. In addition, it refines around 35% of the world’s nickel, 58% of lithium, and 70% of cobalt.

    Among some of the unique materials on China’s list is gold. Although gold is used on a smaller scale in technology, China has sought gold for economic and geopolitical factors, mainly to diversify its foreign exchange reserves, which rely heavily on the U.S. dollar.

    Analysts estimate China has bought a record 400 tonnes of gold in recent years.

    China has also slated uranium as a critical mineral. The Chinese government has stated it intends to become self-sufficient in nuclear power plant capacity and fuel production for those plants.

    According to the World Nuclear Association, China aims to produce one-third of its uranium domestically.

  • Cyprus echoes mining industry shift, Venus Minerals chairman says

    Cyprus echoes mining industry shift, Venus Minerals chairman says

    Among the discussions surrounding the Act’s pivotal role, the event emphasised its implications for Eastern and South-Eastern Europe’s sustainable development and security.

    Key stakeholders, including major raw materials producers from Greece and Regional Innovation Scheme (RIS) countries, deliberated on the EU’s investment potential in raw materials industries and the critical objective of decarbonization.

    At the heart of these discussions lies the Critical Raw Materials Act, a legislative initiative designed to address strategic dependencies on vital raw materials.

    Having secured passage in the European Parliament in September 2023, the Act is currently under negotiation between the Parliament, member states, and the European Commission.

    The Act seeks to fortify the entire value chain of critical raw materials within Europe, diversify imports to reduce strategic dependencies, enhance the EU’s ability to monitor and mitigate risks of supply disruptions, and promote circularity and sustainability.

    Moreover, it also sets targets to boost domestic capacity for mineral extraction, processing, and recycling.

    Mark Rachovides, Chairman of Venus Minerals, representing Euromines, the voice of the European metals and minerals mining industry, highlighted the Act’s significance and the path toward its adoption by member states.

    Rachovides expressed optimism about forthcoming discussions shaping the planning and regulation of mining activities, the recognition of by-products’ strategic importance, and the Act’s integration into broader EU legislation.

    He stressed the potential for regulatory shifts to influence behaviour, advocating for essential trade-offs in the EU’s transition to a greener economy.

    “There’s a notable change in perspective, with a growing political momentum favouring mining, and downstream users acknowledging the value of an EU-based mining industry,” Rachovides noted.

    This shift in perspective is echoed in Cyprus, where Venus Minerals eyes the development of local resources, aiming to position the island as a primary supplier of raw materials to the EU.

  • Council and Parliament strike provisional deal to reinforce the supply of critical raw materials

    Council and Parliament strike provisional deal to reinforce the supply of critical raw materials

    The political agreement reached today keeps the overall objectives of the original proposal but strengthens several elements. It includes aluminium in the list of strategic and critical materials, reinforces the benchmark of recycling, clarifies the permitting procedure for strategic projects, and requires relevant companies to perform a supply-chain risk assessment on their sourcing of strategic raw materials.

    Ensuring the supply of raw materials locally and globally

    The Commission’s proposed regulation establishes a list of 34 critical raw materials (including 16 strategic ones) and sets targets to increase the EU contribution of these substances (10% for the extraction; 40% for the processing and 15% for the recycling). To achieve this, the proposal called for a quick and simplified permit procedure for strategic extracting projects, to be dealt by a single national contact point. It also called for risk analysis of possible dependencies, member states’ exploration plans, higher investment in research, innovation and skills; and protection of the environment by promoting the circularity and sustainability of raw materials.

    On the global stage, the regulation identified measures to diversify imports of critical raw materials ensuring that not more than 65% of the Union’s consumption of each strategic raw material comes from a single third country.

    Main elements of the agreement

    The provisional agreement adds one critical raw material (aluminium) to the list of strategic raw materials (hence, 34 critical raw materials and 17 strategic raw materials). The compromise text also considers that in addition to the natural graphite (which already in the list) the synthetic graphite will also be a strategic raw material during a period of three years, until the Commission makes the first revision of the list.

    Furthermore, the agreement allows that projects able to produce innovative raw materials that substitute strategic raw materials in relevant technologies can be candidates to become strategic projects

    Member states will have the possibility to object on whether a project will be developed on their territories.

    Realistic benchmarks

    The provisional agreement keeps the benchmarks of 10% for extraction of raw materials and 40% for processing but increases the benchmark for recycling to at least 25% of EU’s annual consumption of raw materials. In addition, there should be substantial increase on the recovery of raw materials present in waste.

    Promoting technologies to moderate consumption

    The co-legislators propose that 18 months after the entry into force of the regulation, the Commission shall present a report on the estimated consumption of each critical raw material for the next three decades.

    Points of single contact

    According to the different administrative systems of each country, member states will be able to designate one or several single contact points, at the level they decide (local, regional or national) and the different stages of the value chain (mining, processing, recycling). Promoters of strategic projects will have a “relevant administrative unit” in these points of single contact who will facilitate the permit granting process for the project.

    Permitting procedure

    The provisional compromise also unifies the timings of the permit procedure. The total duration of the permit granting process should not exceed 27 months for extraction projects and 15 months for processing and recycling projects. While the first step of the environmental impact assessment (the production of the report, which must be conducted by the project promoter) will be not included in the time-line for the project approval, the public consultation needed for an environmental impact assessment will be part of the total duration of the permit process.

    Company risk preparedness

    Large companies exposed to shortages of strategic raw materials in strategic technologies (i.e. battery manufacturers, hydrogen producers, renewable energy generators, data transmission and storage, or aircraft production) will have to regularly carry out a risk assessment of their supply chain of strategic raw materials, which they may present to their board of directors, mapping where the materials come from, what can affect their supply and what are the vulnerabilities to supply disruptions.

    Background

    The Critical Raw Material Act, together with the Net Zero Industry Act and the Reform of the electricity market design is one of the flagship legislative initiatives of the Green Deal Industrial Plan that the Commission presented on 1st February 2023. The three were presented as a package on 16th March. The Council adopted the negotiation mandate on 30th of June.

  • EU agrees mineral supply targets to cut reliance on China

    EU agrees mineral supply targets to cut reliance on China

    The European Commission proposed the Critical Raw Materials Act in March, a centrepiece of EU strategy to allow it to compete with the United States and China in making clean tech products.

    The proposal said the European Union should extract 10%, recycle 15% and process 40% of its annual needs by 2030 for 16 “strategic raw materials”.

    The European Parliament and the Council, the grouping of EU governments, needed to agree on a common text. They did this on Monday, parties from both sides said, paving the way for the law to enter force in early 2024.

    Negotiators upgraded the recycling target to at least 25%. Parliament negotiators also said the European Commission would pass a related act in 2027 that set a recycling target related to annual waste collected, rather than consumption.

    The negotiators also agreed to add aluminium to the list of strategic raw materials as well as synthetic graphite. Natural graphite was already in the list.

    The latter inclusion reflects China’s plan to tighten export controls for graphite. China refines over 90% of the world’s graphite into material that is used in almost all electric vehicle anodes, the negatively charged portion of the battery.

    The EU is also heavily reliant on China for rare earths and lithium, other vital materials for its green transition.

    The act’s aim is that no third country should provide more than 65% of any strategic raw material, which also includes cobalt, copper, magnesium and titanium.

    The act sets time limits on granting permits for strategic mining, recycling and processing projects, and requires large companies needing strategic materials in key technologies to do regular risk assessments of their supply chains.

    It also has provisions designed to moderate consumption.

    EU industry chief Thierry Breton said in a statement that, without action, Europe risked shortages and unwanted dependencies, and that the law would ensure high environmental and social standards.

    The bloc will work with EU members to identify strategic projects that will benefit from shorter and more efficient permitting procedures and easier access to finance, he added.

  • Resilience Can’t be Imported: European Steel Makes the EU Stronger

    Resilience Can’t be Imported: European Steel Makes the EU Stronger

    Policymakers know that the stakes are high at this moment of transition in Europe. Will they realise how important it will be for that growth to ‘come from within’? Prioritising European-made steel will help ensure resilient EU clean tech value chains.

    Axel Eggert is the Director General of the European Steel Association (EUROFER).

    In a local shop the other day, I saw one of those decorative quote boards. It read, “Resilience comes from within”. While I most definitely was not in the market for such an object, the word ‘resilience’ caught my eye because recently we’ve been hearing that term a lot around Brussels. Resilient and secure EU clean tech value chains are key to cutting CO2 emissions and achieving carbon neutrality.

    But the conversation also must focus on what it will take to build a clean energy supply chain for the EU. Steel is, quite literally, the foundation of Europe. To ensure that the EU meets its ambitious Green Deal climate goals and remains prosperous and autonomous, the steel that builds the backbone of Europe’s growth must ‘come from within’ – and be made in Europe.

    As they consider impending policies, European policymakers need to know what’s at stake. Simply put, prioritising European-made steel will make the EU clean tech value chains more resilient.

    With more than 60 decarbonisation projects underway, and with its first breakthrough technologies to implemented at industrial scale already in 2025 and 2026, the European steel industry is paving the way for a truly net-zero emissions economy. If implemented successfully in Europe, these projects will deliver dual benefits: 1) they will create demand for clean hydrogen and electricity, and 2) they will supply the green steel that is needed to build windmills, electrical vehicles, modern buildings and  infrastructure.

    However, this successful transition cannot – and should not – be taken for granted. Production costs for EU steel companies are increasingly uncompetitive compared to those in third countries, where energy costs are 2-4 times lower than in the EU. Global overcapacities, often fuelled by state subsidies, result in unfair trade practices that undermine the economic sustainability required for the decarbonisation investments.

    In the last decade alone, Europe has lost 26 million tonnes of steel production capacity and a quarter of its workforce. Thus the EU has become a net importer of cheaper and highly carbon-intensive steel from China and other countries. In fact, imports into the EU have reached a historical record of 28% market share.

    This time things are different. As other strategic clean tech sectors, such as wind and electric vehicles, start experiencing the same vicious circle, there is a growing understanding that the EU must change course.

    We face two game-changing factors. First, the geopolitical and economic system we have relied on since the end of the Second World War is now under question. Second, Europe is losing its competitive edge to the US, China and other countries. Commenting recently on the EU’s eroding global competitiveness, former president of the European Central Bank and former Italian prime minister Mario Draghi said the EU should be very worried about competitiveness, and cited high energy costs as a key issue to be addressed.

    If the global race for clean technologies is now the new engine of Europe’s prosperity, we must lead it. We need to thrive, not just survive. The EU can no longer rely on systemic dependencies, whether they are with friends, frenemies or rivals.

    Today, open strategic autonomy lies at the heart of the clean tech value chain. What does this mean in practice? As European Commission President Ursula von der Leyen rightly stated in her 2023 State of the Union Address, ‘from wind to steel, from batteries to electric vehicles, our ambition is crystal clear: the future of our clean tech industry has to be made in Europe.’ Without a clean tech value chain in Europe – that is, without windmills, solar panels, electrolysers, batteries, and electric vehicles – we risk losing our prosperity and our autonomy.

    And each one of those technologies, and so many more, are forged with steel. Steel forms the backbone of the entire clean tech value chain, and the material has underpinned the EU’s economy since the Schuman Declaration in 1950. Today, nearly 75 years later, steel accounts for 2.5 million jobs (direct, indirect and induced) and generates €143 billion in Gross Value Added annually across sectors. Steel and other industries that are essential for clean tech value chains must be at the top of the EU agenda today and after the 2024 elections.

    So, how to put von der Leyen’s words into practice and ensure the transition to a sustainable European steel industry? EU policymakers should focus on five priority areas, as outlined in the Manifesto of the European Steel Industry:

    • Industrial policy: streamline a joint green industrial policy across all policy areas to spur investments and create lead markets for green products, under the coordination of a Commission Executive Vice-President.
    • Energy: urgently deliver internationally competitive energy prices for the industry, while accelerating the production of clean electricity and hydrogen as well as prioritising its use in sectors with the highest CO2 abatement potential.
    • Trade: establish an effective EU-US Global Arrangement on Sustainable Steel to tackle global emissions and address excess capacity, while enforcing a robust trade policy as well as implementing an effective Carbon Border Adjustment Mechanism (CBAM).
    • Raw materials: ensure access to both primary and secondary raw materials including steel scrap, which are essential for the green transition, while saving natural resources and emissions.
    • Skills: attract young talent to support the sector’s transition, and upskill and reskill the workforce to ensure a just transition.

    Resilience is key, and it comes from within our borders. Europe’s future can only be stronger with European steel.

  • New EU power market, same old problems for metals sector

    New EU power market, same old problems for metals sector

    The proposed changes to the EU’s “electricity market design” are a response to the spike in European power prices following Russia’s invasion of Ukraine in February 2022.

    They will, according to Spain’s Energy Minister Teresa Ribera, mean that “consumers across the EU will be able to benefit from much more stable prices of energy, less dependency on the price of fossil fuels and better protection from future crises”.

    But will it be enough to save Europe’s struggling industrial metals production sector?

    The brutal reality is that half of the region’s primary aluminum and zinc capacity and almost a third of its silicon capacity is currently offline due to high power prices.

    The immediate impact comes with potential future impact as well.

    Producers are reluctant to invest in the new metals capacity needed to achieve Europe’s self-sufficiency goals because they can’t model power prices over the time-frame to build a new mine or smelter.

    “We need bold action to get out of a dead-end street,” was the stark warning from Bernard Respaut, head of the European Copper Institute (ECI), speaking at a debate on Europe’s power crisis jointly hosted with industry association Eurometaux.

    Light-tough reform

    European power prices have fallen a long way from their 2022 peaks, when the region was still reeling from the reduction in Russian gas supplies.

    However, they are by no means back to levels trading before Russia’s invasion of Ukraine, and that isn’t going to change any time soon.

    Wholesale pricing will continue to be determined on a pay-as-clear model, where bidding goes from the cheapest to the most expensive source, which tends to be gas. It’s just that it’s now LNG rather than Russian gas that sets the price.

    EU member states were deeply split on proposals for more fundamental reform of Europe’s power market to allow for a complete break of the gas-power price linkage.

    The hard-won compromise keeps the existing market mechanism, which its supporters claim is more efficient than other models in a liberalized electricity market.

    Rather, the focus will be on longer-term price stabilizers such as power purchase agreements (PPA) between generators and users and two-way contracts for difference (CFD) for investment in new green generation.

    The PPA problem

    US aluminum producer Alcoa is a poster child for Europe’s PPA model, using it to help secure the long-term future of its San Ciprian smelter in Spain.

    The company has PPAs with local power suppliers Endesa and Greenalia covering around 75% of the smelter’s base load power when it returns from care and maintenance next year.

    Alcoa has the advantage of being in Spain, which has been aggressively building out renewable energy capacity and has Europe’s most developed PPA market.

    The country is Europe’s third highest renewable energy generator, much of it solar, and has by far the highest PPA contract capacity at a current 4.2 gigawatts, according to the European Commission. (“The development of renewable energy in the electricity market”, June 2023).

    Others are not so fortunate.

    “We can’t buy a PPA because it’s not available on the market,” Mats Gustavsson, head of energy at Swedish base metals producer Boliden, told the Eurometaux meeting.

    With limited forward liquidity in the company’s local Nordpool power market, “no-one’s willing to take the risk on a fixed-term PPA”, he said.

    Even if the local market structure allows for PPAs, many smaller companies struggle to pass the credit tests needed to sign what can be as long as a 10-year contract.

    Moreover, many power suppliers will only offer PPAs on a pay-as-produced basis rather than the base-load structure that metal producers would prefer.

    The EU reform package is intended to iron out some of these problems by, for example, mandating member states to ensure guarantee schemes for smaller companies looking to enter PPAs.

    But it offers neither short-term relief for Europe’s many mothballed production facilities nor the levels of certainty needed to build the next generation of mines and processing plants.

    Strategic dialogue

    Europe’s focus on the longer-term solution, pivoting towards cheaper renewable energy, leaves untouched the immediate problem of tying spot power pricing to a volatile gas market.

    The bloc’s power prices have historically been twice those of the US, but are now three or four times higher.

    Metals producers are not only having to adjust to currently high electricity costs, but face even higher costs as they seek their own pathway to net zero.

    The danger is that the cost of going green “is going to kill us”, Gustavsson said. Boliden, it’s worth noting, has just shuttered its Tara zinc-lead mine in Ireland at least partly due to high energy costs.

    The answer, according to the ECI’s Respaut, is to take a more comprehensive approach to Europe’s industrial base and connect the disparate dots of critical metals production, renewable energy and power pricing.

    Europe has to decide which strategic sectors it wants to keep and what it needs to do to help them not just survive but thrive.

    And it needs to do so sooner rather than later.

    As Respaut concluded: “We need to get to action, because time is running.”

     

  • Mining for minerals is not a European business

    Mining for minerals is not a European business

    The EU wants to revive mining in Europe. One stumbling block: it does not have the money to give its ambitions the foundations they need. Banks shy away from what they see as risky trades, while the sector is controlled by non-European actors.

    Gathered in the Berlaymont hotel in late January, a short walk from the EU offices and Belgium’s national car and military history museums, executives from Europe’s leading banks were called to action. “I want you to invest,” European Commissioner Thierry Breton told the financiers, “in operations in the critical raw materials value chain.”

    Two months later, the European Commission presented its draft Critical Raw Materials Act. The CRMA, which could be among the fastest EU laws ever adopted by early 2024, wants to guarantee Europe’s supply of nickel, lithium, magnesium and other materials essential for the green transition and strategic industries. They are vital for electric cars and renewable energy, military equipment and aerospace systems, as well as laptops and mobile phones.

    The Commission wants new mines to open across Europe, reducing the bloc’s dependency on China, but there is a problem. One which Thierry Breton’s hotel gathering reflected: the Commission has no specific fund to finance its CRMA ambitions.