Securing raw materials through overseas mining for industry and the energy sector

Germany is one of the world’s largest industrial centres, yet has only limited domestic reserves of many important raw materials. There is a high degree of import dependency for numerous metals and minerals required in industry, mechanical engineering, the chemical sector and future technologies.

The question of how to secure this supply in the long term is therefore becoming increasingly important. At bauma, this topic was examined from a perspective that is often little known outside the mining industry: overseas mining. This is not simply a matter of purchasing raw materials on the world market, but of direct participation in international raw materials projects.

The Foreign Mining Association (FAB) explains strategic raw material extraction

The Foreign Mining Association addresses the question of how companies can gain access to key raw materials that are not produced in Germany, or are no longer produced in sufficient quantities. Metal ores and specialised raw materials, which are indispensable for numerous industrial applications, are particularly affected. Whilst traditional imports cover immediate raw material requirements, overseas mining takes a different approach. Companies participate directly in deposits or operate their own extraction projects abroad. The aim is to reduce dependence on external producers and secure stable supply chains in the long term. According to industry figures, Germany imports raw materials worth well over 100 billion euros per year. At the same time, many raw materials markets are subject to significant price fluctuations. Costs for industrial companies can rise considerably, particularly during periods of high demand.

Own mining projects as protection against raw materials risks

Raw materials markets are considered cyclical. Periods of low prices are often followed by significant price rises. For companies with high material requirements, this can lead to considerable strain. Own raw material projects provide additional opportunities to influence security of supply. This not only gives companies access to production volumes, but also allows them to hedge against sharp market fluctuations to some extent. The following regions are considered particularly interesting:

• Australia, with large and well-developed deposits
• North America, with a stable legal framework
• South America, with significant metal deposits
• Africa, with great development potential in mining
• Asia, with numerous deposits and growing demand

Rare earths and speciality metals as critical raw materials

The industry is following developments in so-called critical raw materials with particular attention. These include, amongst others, rare earths, which are required for electric motors, magnetic technologies and numerous high-tech applications. A frequently cited example is neodymium. The metal is used in high-performance permanent magnets and plays a key role in electric motors, wind turbines and many industrial applications. A large proportion of the world’s reserves and processing facilities are concentrated in China. In addition to rare earths, other special metals are also in focus. These include, for example, tungsten and molybdenum. These metals are required for high-quality alloys and technical applications. Their extraction is often complex, as they frequently occur alongside other ores and must subsequently be separated from one another in elaborate processes. It is precisely this combination of limited availability, complicated processing and high demand that makes many of these raw materials susceptible to price spikes and supply bottlenecks.

Companies are increasingly investing in international projects

The debate surrounding security of supply has gained significance in recent years. According to the trade association, companies from various sectors are already directly involved in international mining projects. These include chemical companies as well as commodity traders and industrial groups. In some cases, the aim is to secure specific commodity flows; in others, it involves long-term stakes in extraction projects. The current market situation is particularly interesting. Whilst some international raw materials companies are currently divesting holdings or projects, industry representatives see this as an opportunity for new investors. Low valuations could make it easier to enter selected raw materials projects.

Environmental standards are becoming a decisive factor

Hardly any other topic is discussed more intensively in connection with mining than environmental protection. The industry emphasises that modern raw materials projects undergo extensive environmental analyses as early as the planning phase. This involves issues of landscape conservation, water management, potential impacts on local residents, and plans for subsequent land reclamation. At the same time, legal requirements vary considerably worldwide. However, in the association’s view, an international standard for environmentally responsible mining is increasingly taking shape. Large investors and international financing partners in particular now demand significantly higher environmental and social standards than was the case a few decades ago. There is also another factor: mining projects are planned over very long timeframes. Ten to twenty years can pass between initial exploration, approval, development and actual extraction. Environmental and sustainability concepts must therefore also be designed with a long-term perspective. The debate surrounding overseas mining thus highlights a fundamental conflict of objectives within modern industrial societies. Raw materials are urgently needed for the energy transition, digitalisation and industrial value creation. At the same time, demands regarding environmental compatibility and social acceptance are rising. The challenge lies in reconciling both aspects – whilst ensuring long-term security of supply.