WHITE PAPER: COMMODITIES PROCUREMENT
stakeholders in the German economy, political decision- makers and parties such as trade associations,” the paper states. It suggests six measures:
1. Diversification of refined and semi-finished metals On the one hand, the EU could support the build-up of metals refinery capacities in other countries by enabling viable business plans. This enablement can have different forms, one being prepayment or loans to finance the infrastructure capital expenditure, which would be repaid by the metals’ delivery. Alternatively, equipment could be financed with (export credit agency-backed) export finance. On the other hand, refinery capacity in Germany and in Europe could be enhanced as well. However, as metals refining has a high energy consumption with a potential negative sustainability impact, this would require further acceleration of renewable and alternative energy production.
2. Raw material sourcing outside the EU Germany and other EU members should secure commodity partnerships with countries in South America and Africa, as well as with Australia, to diversify the supplier basis for raw materials. These partnerships could either be set up via traditional long-term supply agreements, via financing the build-up of infrastructure for commodities in the partnership region, or via directly investing in foreign commodities producers.
3. Raw material sourcing within the EU Europe also has metals reserves which have not been mined over recent years, the paper states. Apart from commodities security, ramping up local mining could also substantially reduce transportation distances, and therefore reduce CO₂ emissions. On the other hand, labour and energy costs, as
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Figure 2: Global demand to production quota for selected key commodities in 2018 vs 2040 outlook
Raw material Cobalt
Germanium
Heavy rare earths Iridium
Light rare earths Lithium
Ruthenium
Demand 2018/ Production 2018 quota
0.4 0.4 0.6 0.0 0.3 0.1 0.4
Demand 2040/Production 2018 quota ESG path
3.9 1.7 5.5 5.0 2.2 5.9 2.4
Middle path Fossil path (unlikely) 2.9 1.7 6.9 2.9 2 4
5.9
1.2 1.9 6.4 0.3 2.2 0.9 19
Source: Deutsche Rohstoffagentur, Rohstoffe für Zukunftstechnologien; illustration by Deutsche Bank
well as bureaucracy levels, are usually higher in Europe.
4. Build up strategic reserves Commodity off-takers should consider the possibility of building up reserves for critical input materials, the paper suggests. However, since this accumulation comes with significant storage, transportation and insurance costs, which result in additional financing needs, clear priorities for which raw materials and refined products should be stored are needed. The paper names two role models: in the US and Japan, public-private partnerships organise the commodities storage based on national surveys. Those surveys identify which commodities are needed and track the quantities of the top 50 products bought and stored by both state and private companies that are needed to withstand supply chain disruptions for up to 90 days.
5. Enhance recycling capabilities and recyclability To facilitate the increase in recycling capabilities, the paper names several initiatives – from increasing regulatory mandated recycling quotas, to creating a legal framework that facilitates
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local recycling capacities. Moreover, products need to be designed in a way that enables them to be split up again, back into original materials. This starts with a thorough control of input materials and their compositions, and could be strengthened if minimum recyclability standards per sector or product category can be agreed.
6. Replace key commodities in the value chain The report states that only a few commodities are currently replaceable. To find more, economically viable substitutes for critical input materials and additional R&D investments are
needed. R&D projects should focus on finding ways to use lower quantities but more readily available commodities. Also, research clusters – bringing together producing companies and academics – could be an important tool to drive R&D. Taking all of these considerations on board, the paper concludes that securing access to commodities in times of geopolitical conflict and decarbonisation commitments will be challenging. But there are measures Europe can take to foster economic resilience, provided that governments, corporates, capital markets and banks can collaborate.
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