Current-low prices in metals market mask long-term challenges
The opportunities for end manufacturers in the European tech industry to invest in sustainable business models and push for higher resource efficiency have been highlighted in a new report by ING: ‘Metals, a dangerous complacency?’.
- High demand for specific rare metals compounded by pressures for more sustainable energy supply
- European manufacturers should grasp low-price window and increased profitability to invest now
- Ownership to use trend creates new opportunities.
With mining capacity having grown and trade barriers dismantled, prices across the global metals market have dropped significantly in the past four years, stewing the profitability of the importing European tech industry. Now is an optimal time for the industry to invest in sustainable business models.
The opportunities for end manufacturers to push for higher resource efficiency have been highlighted in a new report by ING, ‘Metals, a dangerous complacency?’. The report suggests that current low prices mask the longer term challenges faced by European industry. As significant importers of (rare) metals, European tech companies in particular need to drive greater efficiency throughout the supply chain, leading to a more sustainable economy and reducing the supply risks associated with imported metals.
'Low raw material prices makes mining companies ‘tired’ and the value chain ‘lazy’'
“The current low price environment makes mining companies 'tired' and the rest of the value chain 'lazy',” said Jurjen Witteveen, senior economist at ING and author of the report. “Manufacturers should take advantage of the current low price window and invest in strategies to create a more efficient supply chain. The design phase is critical – a culture shift towards creating products that are easily recycled or remanufactured will take us one step closer to a circular economy.”
A burgeoning middle class in Asia has spiked the need for raw metals, with demand for aluminium in China growing five-fold over the past decade, representing over half of global demand. At a certain point low prices and current metal reserves give way to longer term environmental, regulatory and societal pressures – including declining ore grades with increasing resulting ‘waste’ and concerns about increased ‘water stress’ in mining.
In addition to the general increase in metals demand, powerful trends are causing the demand for specific metals to rise. For the tech industry, demand for rare earth metals such as gallium, which is used in LED lamps, is expected to be nearly 400% by 2030 higher than current production.
“The transition to sustainable energy supply and reduced harmful emissions has stimulated the demand for wind turbines, LED lights, solar panels and electric vehicles,” explains Witteveen. “This has put enormous pressure on rare metals such as neodymium, indium and germanium. Future demand for these resources is likely to be much higher than current production.”
Suppliers are employing various strategies for materials saving, such as recycling scrap (though the share of recycling is hardly increasing), substitution of metals and improvements in processes. However, for links further down the supply chain, such as engineering and transport equipment, the situation is different: development and software costs are high, while material costs remain relatively low. Competition for consumers often means that price and ease of use come first, with recyclability neglected.
Witteveen concludes that the biggest steps towards a more sustainable circular economy can be made in the product design phase. While immediate price incentives are limited, there is a gradually accelerating consumer trend for flexibility in products, which is driving a shift towards the ‘ownership to use’ business model. Designing products that are componentised and can be easily disassembled will create an impetus for remanufacturing and new business opportunities for end manufacturers.