Regulation | ~ 3 min read
Critical thinking on raw materials
Critical raw materials – such as lithium, cobalt, copper and nickel – are economically and strategically important due to their lack of substitutes. They are essential to the clean energy transition and digital technologies, but global tensions have exposed weaknesses in the supply chain.
Critical raw materials (CRM) are vital for the speed of the clean energy transition because they’re used in solar, wind and electric vehicle technologies. Fuelled by rising demand and rising prices, the market for CRMs doubled in the last five years to USD 320 billion, according to International Energy Agency (IEA) estimates1. With no alternatives to these critical materials they are vulnerable to supply chain risks. Securing their future availability is complicated by the fact that different countries define their own lists of economically-critical materials, and supply is concentrated in only a few countries.
The good news is that current planned critical raw materials projects are expected to meet forecast demand, but what about the longer-term? For renewable energy solutions to support the goal of limiting global warming to 1.5°C by 2030, additional raw materials will be required. With the same IEA report highlighting the existing lack of supply diversity, is there a solution?
Regulating for greater resilience
The goal of the proposed European Critical Raw Materials Act of March 2023 is for the European Union (EU) to secure its own supply of raw materials with less reliance on other countries. This means more than 10% of extraction, more than 40% of processing, and more than 15% of recycling should take place in the EU. For strategic materials – including cobalt, nickel and copper, which have high growth potential and are more complex to produce – the Act aims to reduce reliance on any single country to below 65%.
The proposal also highlights the need to develop a circular economy for minerals to complement the use of new materials. Meanwhile, the European Council has taken a stronger stance, proposing that further targets and the addition of aluminium to the list of materials should be included.
Our take
We welcome the EU focus to build a more resilient CRM supply chain to support the low-carbon transition. But this needs to be complemented by circularity in the use of minerals to minimise negative environmental and social impacts of extraction while meeting market demand.
Look out for our research paper on the circular economy later this year.
Read more from Allianz Economic Research:
“Critical raw materials – Is Europe ready to go back to the future?”
Recent insights
-
Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted. This material has not been reviewed by any regulatory authorities. In mainland China, it is for Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations and is for information purpose only. This document does not constitute a public offer by virtue of Act Number 26.831 of the Argentine Republic and General Resolution No. 622/2013 of the NSC. This communication's sole purpose is to inform and does not under any circumstance constitute promotion or publicity of Allianz Global Investors products and/or services in Colombia or to Colombian residents pursuant to part 4 of Decree 2555 of 2010. This communication does not in any way aim to directly or indirectly initiate the purchase of a product or the provision of a service offered by Allianz Global Investors. Via reception of this document, each resident in Colombia acknowledges and accepts to have contacted Allianz Global Investors via their own initiative and that the communication under no circumstances does not arise from any promotional or marketing activities carried out by Allianz Global Investors. Colombian residents accept that accessing any type of social network page of Allianz Global Investors is done under their own responsibility and initiative and are aware that they may access specific information on the products and services of Allianz Global Investors. This communication is strictly private and confidential and may not be reproduced, except for the case of explicit permission by Allianz Global Investors. This communication does not constitute a public offer of securities in Colombia pursuant to the public offer regulation set forth in Decree 2555 of 2010. This communication and the information provided herein should not be considered a solicitation or an offer by Allianz Global Investors or its affiliates to provide any financial products in Brazil, Panama, Peru, and Uruguay. In Australia, this material is presented by Allianz Global Investors Asia Pacific Limited (“AllianzGI AP”) and is intended for the use of investment consultants and other institutional /professional investors only, and is not directed to the public or individual retail investors. AllianzGI AP is not licensed to provide financial services to retail clients in Australia. AllianzGI AP is exempt from the requirement to hold an Australian Foreign Financial Service License under the Corporations Act 2001 (Cth) pursuant to ASIC Class Order (CO 03/1103) with respect to the provision of financial services to wholesale clients only. AllianzGI AP is licensed and regulated by Hong Kong Securities and Futures Commission under Hong Kong laws, which differ from Australian laws. This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors (Schweiz) AG; Allianz Global Investors UK Limited, authorized and regulated by the Financial Conduct Authority; in HK, by Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; in Singapore, by Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; in Japan, by Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments Business Operator), No. 424], Member of Japan Investment Advisers Association, the Investment Trust Association, Japan and Type II Financial Instruments Firms Association; in Taiwan, by Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan; and in Indonesia, by PT. Allianz Global Investors Asset Management Indonesia licensed by Indonesia Financial Services Authority (OJK). 3131100