What is happening to the raw materials?

Introduction

Which are the factors that stand behind the steep raw material price hike that was triggered during the pandemic crisis? What role will the energy transition play in setting the future raw materials' needs and which will be the challenges that will follow? And then, which will the European economy's perspectives be, as it is so dependent on third countries for its “critical” raw materials' supply?

The document analyses the economical, structural, geopolitical and speculation factors that have caused the pronounced raw material prices increase. It underlines the consequences and risks that Europe has to face due to the shortage of the “critical” raw materials that are essential for winning the energy transition challenge.

Read the study's key messages and download the document for a more detailed analysis.

The global economic recovery has been faster than expected and has driven the demand for raw materials and semi-finished products.
This increase in demand hasn't been met by an adequate increase in supply. This has given rise to a significant price increase that for some raw materials has led to the highest levels for over two decades.
The price list increases from April 2020 to December 2021 have been astonishing: +1,692% for natural gas, +218% for Brent, +152% for coal, +89% for copper and +85% for aluminium.
These price increases are due to various factors: economical, structural, geopolitical and speculation.
- Besides the unbalance between demand and supply, other decisive economic factors have been the cut in crude oil production set by the OPEC+ countries, the extreme climate conditions in some crucial markets and other adverse events such as the Suez Canal disruption.
- The remarkable hike in demand for the commodities that are needed to meet the targets set for the ecological transition are among the structural causes.
- The geopolitical factors include the predominant weight in the international context of just a few players - such as China and Russia and their satellite countries - in regards to controlling the raw materials as well as highly destabilising events such as the coup in New Guinea that is an important bauxite exporter. All this has caused a severe slowdown in the global supply chains.
- Finally, financial speculation has been remarkable and has amplified the pressure on the price increases.
Most of Europe's supply of the “critical” raw materials that are essential for the energy transition is provided by third countries: more than 98% of the rare-earth elements comes from China, 87% of lithium from Australia, 71% of platinum from South Africa.
In order to assure a safe and resilient raw material supply, investing in innovation, diversifying the third country supply and enhancing the circular use of resources is an extremely crucial step.

Read the brief (Available in Italian)