Raw materials, prices rise: slowing the ecological and digital transition. The role of China | Milena Gabanelli

Appliances, furniture, food, automobile factories are all coming to a halt. Right now that the question starts again. The question is almost all raw materials have become unavailable and very expensive. The British call it the everything bubble: the bubble on the prices of anything. For a transforming country like Italy, which has to import almost everything, this is becoming a serious problem. What is happening is the result of three factors that add up: real, financial and logistical.

The cause

Let’s start with the real ones. In the first months of the pandemic, the prices of raw materials fell by 20-30%. The China, which has a planned economy, he immediately took the opportunity to stock up, also benefited by the fact that it left four months in advance. But immediately afterwards the prices started to rise again, and now they are skyrocketing, because all the countries have left suddenly, with the warehouses of every continent empty due to the just-in-time organization (companies have become accustomed, to be more efficient, not to accumulate stocks) and, therefore, now they must be filled by zero. Then there are causes that have to do with the financial markets. Commodities have become an attractive investment because they are priced in dollars, weak currency at the moment, so they are convenient for those who buy them in euros or other currencies. In addition: investing in government bonds with very low yields, so we might as well put money into commodities and derivative securities related to them. To all this we must add the disproportionate increase in transport costs. The Dry Baltic Index, an index that summarizes the shipping costs for dry and bulk products (minerals, cereals, etc.), recorded a + 605% in the last year. Among the causes also the introduction of the new regulation approved by the International Maritime Organization which requires all ships to lower the share of sulfur in fuel oil: from 3.5% (mass by mass) from January 2020 to 0 , 5%. This change involved the scrapping of some of the ships and revamping of others, including for container ships and bulk carriers that transport goods from the Americas, Africa, Asia and Australia, and the cost was passed on to prices.

(…) disproportionate increase in transport costs. The Dry Baltic Index (…) recorded a + 605% in the last year.

Rare earths, lithium, cobalt

According to Professor Achille Fornasini, professor of financial market techniques in Brescia, this situation will deflate, because production levels are even lower than those of 2019, so in a few months, prices will drop to levels that reflect real demand. But this reasoning doesn’t apply to all commodities. There are in fact some raw material necessary in quantities never used before, because they are indispensable to the two revolutions underway in the production system: the green transition and the digital one.

We are talking about copper, lithium, silicon, cobalt, rare earths, nickel, tin, zinc. In just a year the pond, used for micro-welding in the electronics sector, recorded an increase of 133%, and demand will continue to grow in the face of a tight supply. The price of copper increased by 115%. Rhodium a rare earth used for electrical connections and for the construction of catalytic converters: pi 447%. Neodymium it is mainly used in the production of super-magnets for lighting systems and the plastics industry. Highly Requested: pi 74%.

China takes it all

Today, revenues from coal production are ten times higher than those generated from the production of the minerals used in the transition process. But, according to the International Energy Agency, the situation will be reversed by 2040.

The most far-sighted were the Chinese. At home they are large copper, lithium and rare earth extractors. And what they lack is in the producing countries: nickel in the Philippines and Indonesia, Congo owns the main cobalt mines. Minerals that then transform directly into the mother country. According to Benchmark Mineral Intelligence, a British analyst firm, 80% of the raw materials needed to build lithium-ion batteries come from Chinese companies.

Europe is increasingly in difficulty

The European Commission points out that there are thirty critical raw materials, including lithium. For the supply of rare earths we depend on China for 98%, the same for borate from Turkey, from South Africa for 71% of the platinum requirement. According to the Commission’s estimates, for electric vehicle batteries and energy storage in 2030 the EU will need up to 18 times the current supply of lithium, and 5 times of cobalt. Quantities that will triple in 2050, while the demand for rare earths used in permanent magnets (electric vehicles, digital technologies, wind generators) will increase tenfold.

For the supply of rare earths we depend on China for 98%, the same for borate from Turkey, from South Africa for 71% of the platinum requirement.

How it comes out

Twenty years behind China, the European Union formed the Raw Materials Alliance last October. The strategy is to become more autonomous by focusing on three objectives. The first: to encourage the mining of metals present on the European territory using advanced technologies. The demand for lithium, for example, can be met internally by 80% by 2025. Today, strategic metals mined in Europe, such as lithium, are then processed mainly in China. The manufacturing process, on the other hand, will be developed quickly in our home. Six innovation centers have been created, one of which in Rome, with the aim of implementing the sector by creating partnerships between companies and between companies and universities. In Italy we have some cobalt in Sardinia and in Punta Corna, in Piedmont, where nickel is also found; while in Gorco, in the province of Bergamo, there is zinc. Of course, these are invasive activities. But it will be decided once and for all whether to leave them in the hands of countries that, in addition to making us economically dependent and exposed to price blackmail, have less rigorous rules than ours and use more polluting technologies.

The damage of non-recycling

Second point: strengthen the recycling activity of precious metals. We have shown that we know how to do it with paper and aluminum, but not with electronic waste, starting with cell phone batteries. As for the recycling of batteries, we send the bulk to China, which now dominates the world market, and we pay it to carry out this type of activity. Then we buy new batteries from China and goodnight. Cobalt is a strategic mineral. From the data of the European Institute of Innovation Technology Rowmaterials: the EU pays to import 40,000 tons every year, half of them end up in products that remain within the EU, where recycling at the end of life is minimal, when instead a percentage that can touch 50% recoverable. We are also going to throw thousands of tons of used computers and mobile phones in landfills in our home and in Africa. An irresponsible behavior that, on the one hand, causes gigantic pollution and, on the other, disfigures the environment because it makes it necessary to extract new cobalt. For this reason, it will be necessary to focus on collection, storage and recycling chains, which today are completely lacking. Third point: to build a common foreign and industrial policy to obtain the concessions of the minerals that we do not have.

Sicomines, a consortium of Chinese state-owned companies, in 2008 signed an agreement with Congo for copper and cobalt mining rights until 2033, for an estimated value of 84 billion dollars. In exchange, it has committed to investing $ 6 billion in the country’s infrastructure and about $ 3 billion in the mining sector. For years, the work of children has been scandalously exploited in those mines, causing the indignation of half the world. Offering better conditions is not just a necessity. a duty.

June 6, 2021 | 22:13


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