EU Commission pushes for joint purchasing of raw materials
While much of the Critical Raw Materials Act (CRMA), proposed by the European Commission on Thursday (16 March), was considered less ambitious than expected by many analysts, its provision on joint purchasing of raw materials may prove pivotal.
With the CRMA, the European Commission seeks to secure the supply of the most essential raw materials for the European industry and reduce its dependence on single large suppliers like China.
However, the recycling and self-sufficiency targets in the CRMA proposal are voluntary, which has led some industry players to describe the proposal as a mere “description of an ambition”.
Yet, at least in one part of the proposal, the Commission is boldly moving ahead, suggesting that it should organise the joint purchasing of critical raw materials for EU companies and member states.
“The Commission shall set up and operate a system to aggregate the demand of interested undertakings consuming strategic raw materials established in the Union and Member State authorities […] and seek offers from suppliers to match that aggregated demand,” Article 24 of the CRMA reads.
Creating European market power
Camille Defard, head of the Jacques Delors Institute’s energy centre, deems this provision “the CRMA’s most ambitious article from a European integration perspective”.
“This is good news,” she told EURACTIV, arguing that joint purchasing would give the EU a more powerful position in the global market.
André Wolf, head of the technology, infrastructure and industrial development at the Centre for European Policy, also argued that joint purchasing was “a reasonable idea”, especially considering the fact that the market for rare earths was far from highly competitive.
“It is very intransparent and there are large market concentrations, with a lot of market power in China,” he told EURACTIV. “It makes sense to establish a counterweight by pooling demand.”
Voluntary or mandatory joint purchasing?
Compared to the joint gas purchasing mechanism that the EU agreed on at the end of last year, the joint purchasing clause in the CRMA proposal is less specific and voluntary.
However, Wolf argued that joint purchasing could also be successful on a voluntary basis, given that European market actors are aware that prices are likely to rise in the coming years due to the increased demand.
Moreover, while the joint purchasing of gas was highly contentious as the gas supply situation varied wildly across the EU, the same is not true for the availability of critical raw materials in Europe.
“Everybody is sitting in the same boat,” Wolf said.
Jacques Delors’ Defard, meanwhile, deems it likely that the joint purchasing could become mandatory for at least a part of the raw material purchases over time, just as it became mandatory for the gas purchases.
However, many questions are still open, for example, which raw materials are concerned and at which level of refinery.
“This provision also raises the question of how to strengthen the technical capacity in the Commission to engage in the raw materials market,” Defard said, adding that there was still some time to prepare for this.
EU unveils Critical Raw Materials Act, aiming to lessen dependence on China
The European Commission unveiled the new regulation on Thursday (16 March), setting targets for the production, refining and recycling of key raw materials needed for the green and digital transitions.
According to Wolf, the joint purchasing provision could help bring about other goals of the CRMA proposal, for example, the establishment of national reserves of critical raw materials.
The European Commission wants member states to stockpile a certain amount of critical raw materials so that the EU would not be faced with an immediate shortage at a time of crisis, but the CRMA does not explicitly mandate these stockpiles.
If companies and member states can be tempted to use the joint purchasing mechanism, however, this could help establish the national stockpiles.
“Joint purchasing will involve large quantities, which might not all be consumed right away,” he told EURACTIV, arguing that this would create a certain amount of reserves as a side effect.
The CRMA is still at the beginning of the legislative process. EU member states and the Parliament have yet to align themselves on the issue.
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