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Article - Raw Materials and Natural Resources

Raw materials – indispensable for Germany’s industrial future

Introduction

Raw materials are the very basis of any industrial value chain. A sound and responsible raw materials policy will strengthen the competitiveness of Germany’s industrial sector and, by extension, of the entire German economy.

Germany is one of the world’s largest consumers of raw materials. This makes a secure supply of commodities, protection for natural resources, and a sparing and efficient use of raw materials and recycling essential features of our economy. They are also parameters used by the Federal Government in developing its raw materials policy, which plays an important role in securing growth and employment in Germany.

Domestic resources are essential for Germany

Germany still has a large amount of raw materials reserves, which, for geological reasons, are spread unevenly across the country.

Germany sources its building materials (especially sand and gravel, broken or crushed stone, limestone and marlstone) and various minerals for industrial use (notably rock salt, potassium salt, silica sand and fluorspar) from domestic sources. Even at a global scale, Germany continues to be an important mining country. In 2016, it was the world largest producer of lignite, the third-largest producer of raw kaolin, the fourth-largest producer of rock salt and the fifth-largest producer of potassium salt. The future of lignite-fired power plants is currently being discussed by the expert commission on ‘growth, structural change and employment’ that was appointed by the Federal Government.

There are many raw materials, however, for which Germany is heavily dependent on imports. This notably applies to energy commodities, metals and large number of materials used in the industrial sector. The last German metal ore mine was shut down in 1992. Since then, all of Germany’s need for metals has had to be met either by importing metals or by recovering them from scrap.

Around 80% of Germany’s waste and scrap is now recycled or undergoes other types of procedures, including thermal procedures, to allow for them to be put to a good use. This even applies to the tiny amounts of valuable metals that can be found in sludge or some forms of scrap. These secondary raw materials recovered through recycling add to Germany’s domestic supply of raw materials, thereby reducing the need for imports.

The potential for recycling is, however, far from being fully harnessed. Innovative technologies and procedures could help boost Germany’s efficiency levels when it comes to the use of raw materials, and reduce the pressure on domestic repositories.

The German Government’s Raw Materials Strategy

Whilst the task of ensuring a secure supply of raw materials falls to the private sector, the Federal Government is responsible for setting the right framework to allow for a sustainable supply system that is also internationally competitive. The government wants to further improve Germany’s access to raw materials, which is why it has designed a number of measures that are designed to achieve four key objectives:

  1. to support the German economy as it diversifies its sources of raw materials
  2. to improve sustainable resources management by relying more on recycling and efficiency
  3. to work more closely with those countries with which Germany has concluded partnerships on raw materials
  4. to support the development of innovative technologies and to conduct more research into materials and raw materials.

Small and medium-sized companies, in particular, can turn to the German Raw Materials Agency (DERA), which is based within the Federal Institute for Geosciences and Natural Resources. The monitoring of critical raw materials produces information on supply and demand trends for primary mineral raw materials, so that impending price and supply risks and problems on the raw materials markets can be identified at an early stage.

In 2011, the Federal Government set up the Helmholtz Institute Freiberg for Resource Technology. The Institute aims to develop innovative technologies that make it possible for mineral and metallic commodities to be produced and used in more efficient ways and to be recycled to protect the environment.

Raw materials and resources – four figures

178
Symbolicon für Bergbau

million tonnes
of lignite, hard coal and mineral oil and another 9 bcm of gas were produced in Germany in 2016.

593
Symbolicon für Kran

million tonnes
of mineral raw materials were produced in Germany in 2016.

11.7
Symbolicon für Geld

billion euros
is the combined value of the raw materials produced in Germany in 2016.

136.8
Symbolicon für Schiff

billion euros
is the value of raw materials imported by Germany in 2016.

Raw materials for future-proved technologies

Future-proved technologies rely on mineral raw materials

As technologies change, so does the need for resources, with demand for certain minerals particularly on the rise. Electric mobility, lightweight construction and renewable energy technologies all depend on the use of base and high-tech metals.

Whilst, from a geological point of view, there is no shortage of these minerals, it is hard to predict technological developments (in German) and the changes in demand for raw materials associated with them. This can lead to price peaks and bottlenecks in the supply chain. It is also becoming increasingly difficult to gain access to metallic raw materials on the global commodities markets. An ever smaller number of companies and countries account for ever growing shares of the global commodities markets. In other words, there is market concentration going on.

Mineral resources needed for electric mobility

Car manufacturers rely on a large number of mineral resources and refined products made from them. These include steel, zinc and aluminium for the body of the car as well as quartz for the windows. Some of these mineral resources used by the automotive industry can be mined within Germany or recycled, but the bulk needs to be imported. In the age of electric mobility, modern electric vehicles are usually fitted with lithium-ion batteries. These batteries are made using lithium, nickel, cobalt and graphite. The electric motors and generators of electric vehicles depend on the use of neodymium and dysprosium. Demand for copper is also growing as a result of the trend towards electric mobility.

When electric mobility goes mass market, as has been forecast, this will also result in higher demand for certain mineral raw materials. None of the minerals that are required for battery production are scarce in geological terms. Whether or not sufficient quantities of these will be available, however, will largely depend on industry’s capacity to respond to the changes in demand patterns. Any sudden surges in demand could result in short-term price peaks and shortages. These would only be of a temporary nature, though, as the supply side would adjust to the higher levels of demand.

Mineral resources needed for lightweighting

The aerospace, automotive, mechanical engineering and construction industries, in particular, but also medical technology have a strong focus on developing and using lightweighting. Lightweighting would not be possible without mineral resources such as aluminium, magnesium and titanium. If these minerals are used in cars, for instance, they bring down the vehicles’ weight and real emissions levels. Lightweighting can also be used to compensate for the higher weight of the battery compared to a traditional engine, and to increase the range of these vehicles.

Mineral resources needed for wind power

With the energy transition, the German energy system is being completely overhauled. New energy technologies have led to a very different pattern of demand for mineral resources.

For instance, neodymium, praseodymium and dysprosium – all classified as rare earths – are needed for the permanent magnets that are part of the generators driving large, low-maintenance offshore wind turbines. These turbines also contain base metals such as aluminium, copper and zinc and also steel.

Alongside imported metals, domestic resources are also used. The base of each wind turbine largely consists of carbonate rock and of sand and gravel, which are used to make concrete. The optic fibre that is part of the rotor blades is made from German quartz sand and from kaolin and carbonate rock.

Raw materials and resources in figures

Transparency on raw materials

We want to promote transparency and due diligence in the supply chain.

The German Federal Government advocates corporate social responsibility and wants to ensure transparency in the supply chain. The government expects companies to exercise due diligence when purchasing raw materials.

This expectation is set out in the National Action Plan for Business and Human Rights (in German). Under this plan, at least 50% of all companies based in Germany and employing more than 500 employees are to have integrated the elements of human rights due diligence described in the NAP into their business processes by 2020 at the latest.

Conflict minerals are to be subject to extra scrutiny

The Federal Government has played an active and constructive role in the drafting of Regulation (EU) 2017/821 on conflict minerals. The Regulation is to help prevent revenue from the sale of tin, tantalum and tungsten and their ores, and from the sale of gold from being used to finance armed conflict. For this reason, as of 1 January 2021, EU companies importing any of these commodities from conflict zones and areas deemed to be at high risk of conflict will have to comply with a number of due diligence obligations.

Compliance will be monitored by designated national authorities. In Germany, this role has been assigned to the Federal Institute for Geosciences and Natural Resources (in German). Legislation transposing the Regulation into national law will be passed to clarify the details, including the scope of action for the authorities and the sanctions to be imposed if the provisions of the Regulation are violated.

The EU Regulation is rooted in the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (in German) (PDF, 784KB). This Guidance is aimed at all mining companies that do business in areas defined as conflict-affected or high-risk areas. Additional detailed recommendations have been issued to companies operating in the tin, tantalum, tungsten and gold industries.

EITI: Extractive Industries Transparency Initiative

Since 23 February 2016, Germany has been a candidate country for the global Extractive Industries Transparency Initiative (EITI) and has been publishing the amounts of payments made by mining companies and the resulting public-sector revenue. Oliver Wittke, Parliamentary State Secretary at the Federal Ministry for Economic Affairs and Energy, is Germany’s Special Representative for EITI with responsibility for implementation in Germany.

This initiative, which seeks to promote greater transparency and accountability in the commodities sector, is being supported by a growing number of governments and by numerous companies and NGOs.

The decision of the German Federal Government to implement EITI sends a strong message of support to developing countries and emerging economies and the joint fight against corruption in the commodity sector. On 23 August 2017, Germany submitted its first EITI report (in German) – an important step towards the country's full EITI membership, which is expected to be decided upon by the international EITI Board in spring 2019.

Respurce efficiency

Sometimes, less is more. Let’s use resources carefully

Our ability to use resources efficiently will be key to safeguarding our future. Our competitiveness, jobs, consumers and the environment all depend on it. The key is to achieve an efficient use of materials and of energy, allowing for synergies.

Resource efficiency makes a major contribution to strengthening and modernising Germany as an industrial base on a long-term basis. With this in mind, the German government adopted ProgRess, the German resource efficiency programme, back in 2012, revising it in 2016 to create ProgRess II.

ProgRess focuses primarily on cooperation with business, voluntary action and innovation. Innovations are crucial drivers of resource efficiency. The central goal of ProgRess is to sever the link between economic growth and the use of raw materials. Between 1994 and 2014, Germany succeeded in improving its resource efficiency by 50%, resulting in a drop in the consumption of raw materials by 14%. This is all the more important because materials are also by far the largest cost factor, accounting for almost 44% of overall expenditure in the goods-producing sector.

As part of its efforts to shine the spotlight on best-practice examples of (raw) materials efficiency, the Federal Ministry for Economic Affairs and Energy and the German Mineral Resources Agency (DERA) present an annual Raw Materials Efficiency Prize. Companies and research institutions can submit their entries for the 2018 round as of 3 September 2018. The Federal Government also wants to promote resource efficiency at international level, particularly within the G7 and the G20. After all, only international cooperation will make it possible for the growing flows of goods being exchanged internationally to be managed in a standardised way that makes international supply chains and logistics more efficient.

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Lightweighting

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Cooperation on raw materials

International cooperation on raw materials

The Federal Government wants German companies to be successful in the global competition for raw materials. This is why it has taken a number of different measures to support them, including the formation of bilateral raw materials partnerships, the establishment of ‘Competence Centres’ and guarantees for business transactions with foreign partners.

International commodities organisations

Germany is a member of numerous international commodities organisations (sometimes in its own right, sometimes via the European Union). This allows the country to benefit from greater market transparency and opens up opportunities for g-to-g and g-to-b dialogue with producers and consumers of individual raw materials. Germany is a founding member of the Common Fund for Commodities. In this capacity, Germany advocates the establishment of value chains in developing countries and of sustainable practices in the raw materials sector.

Raw materials partnerships

The extent to which countries and companies have access to raw materials depends not only on their technological capabilities, but also on the economic and political background. In recognition of this fact, the Federal Government has made bilateral raw materials partnerships part of its overall raw materials strategy. Up until today, intergovernmental agreements establishing raw materials partnerships have been concluded with Mongolia (in German), Kazakhstan (in German) and Peru (in German). Other bilateral partnerships have been formed using Joint Declarations to this effect (with Chile and Australia) or by exchange of notes (with Canada). These are cases in which business has concluded its own contracts under private law. These contracts can then be given additional backing and support by the government and its foreign trade and investment instruments as well as under its foreign policy. The actual implementation of the raw materials partnerships is also supported by the countries’ governments, which hold bilateral working groups, and organise economic committees and expert forums.

Competence Centres for Mining and Mineral Resource

The Federal Ministry for Economic Affairs and Energy is providing funding for a number of Competence Centres for Mining and Mineral Resources that have been established within the bilateral chambers of commerce and industry in selected mining countries. These centres conduct investigations and analysis and provide German companies with information about opportunities and risks associated with these markets, their potential and possible hindrances firms may encounter. They also help companies find the contacts they need. The work of the centres fits in well with the raw materials policy championed by the Federal Government whilst also helping to promote the sale of German mining technology abroad. So far, centres have been established in Australia, Brazil (in German), Chile (in German), Canada, Peru (in German) and South Africa, with the latter serving southern Africa as whole and in particular South Africa, Zambia and the Democratic Republic of the Congo.

The Competence Centres have teamed up with the German Mineral Resources Agency (DERA)(in German), Germany Trade & Invest (GTAI) and the Association of German Chambers of Commerce and Industry (DIHK) to form the German Mining Network, thereby ensuring a good flow of information beyond centres’ individual focus areas.

Guarantees for untied financial loans granted for foreign raw materials projects

The guarantees for untied financial loans also form part of the Federal Government’s raw materials strategy. Guarantees for untied financial loans are used to hedge the economic and political risk incurred by those investing in raw materials projects abroad. The Federal Government uses these guarantees to support German companies in their efforts to conclude long-term supply contracts for the raw materials they need. The guarantees are issued by Euler Hermes, a listed company that acts as agent for the Federal Republic of Germany. For additional information, please visit agaportal.de (in German).

Underlying lagislation and regulations

The legal framework governing Germany’s supply of raw materials

The most important piece of legislation governing mining in Germany is the Federal Mining Act (BBergG). Lead responsibility for mining legislation lies with the Federal Ministry for Economic Affairs and Energy.

The mining authorities of the Länder are responsible for enforcing the Federal Mining Act. Depending on the type of mineral, the mining authorities may be in charge of licencing and supervision. The Federal Mining Act sets out the basic legal requirements that must be met for mining companies to be able to receive a licence to operate. This particularly applies to health and safety and hazard prevention, third-party rights and environmental protection.

The Federal Mining Act stipulates the rules on exploration, extraction and on the processing of minerals. It also provides that former open-cast mines must be rehabilitated and sets out the rules governing the construction and operation of underground storage sites. cOil and gas exploration and extraction in Germany’s offshore locations is also subject to the provisions of the Federal Mining Act. In addition to the federal law, the Länder and their regional authorities also issue their own legislation and regulation on mining on their territories.

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