Conclusions and recommendations
Definitions and terminology
1. We
are concerned that much of the Government's response to this inquiry
focussed on rare earth elements when there are clearly a number
of other strategic metals that are important to the UK. Furthermore,
we are concerned by the interchangeable usage and confusion of
the terms rare earth element (REE) and strategic metal. In order
to ensure the formulation of appropriate policy and support for
UK metals users, the Government must use clear terminology. In
our view strategically important metals comprise the rare earth
elements, the platinum group elements and other main group elements
of importance to the UK, such as those identified in Table 1.
The rare earth elements are only one very specific group of metals,
therefore the term "rare earths" must not be used to
describe all of the above. (Paragraph 17)
Importance of strategically important metals to
the UK
2. There
is some disagreement about the vulnerability of the UK to metal
shortages, especially in comparison to more intensive users such
as Japan and the USA. However, there are important sectors of
the UK economy that already rely upon a wide range of metals at
stable prices. Furthermore, a stable supply of metals will be
important in the transition to a low carbon economy. We are pleased
that the Government recognises the importance of metals to the
green economy, securing green growth and re-balancing the economy
towards high value-added manufacturing. (Paragraph 24)
Departmental responsibilities
3. We
conclude that it would be beneficial to industry if the Government
were to clarify which departments have responsibility for strategic
metals. The Government acknowledged its role to provide resource
information to the private sector: it is reasonable to expect
that this information include which metals are of strategic importance
to the UK. We seek clarification on which department decides which
metals are of strategic importance to the UK, which department
provides high-quality information on resources, how regularly
this information is updated and how this information is shared
across Government and disseminated to businesses. We agree with
the conclusion in the recent Defra report on resource risks that
a shared database would develop business and Government understanding
of resource risks in the future. We invite the Government to set
out a timetable for developing such a database and explain what
arrangements would be made for publishing all or part of it. (Paragraph
34)
Non-metals
4. We
note the strategic importance of certain non-metals and as it
is outside of the scope of this inquiry, we may choose to return
to this in the future. However, in responding to this report.
we invite the Government to explain how it will ameliorate the
risks posed by the potential scarcity of helium. (Paragraph 36)
Metals supply
5. Most
strategic metal reserves are unlikely to run out over the coming
decades. In practice, improved technology, the use of alternative
materials and the discovery of new reserves are likely to ensure
that strategic metals are accessible. There will, however, be
significant environmental and monetary cost associated with the
exploitation of lower grade minerals. (Paragraph 44)
6. Monopolies and
oligopolies in strategic metals distort the market. They can arise
because of a variety of reasons, including economic, political,
geographic and environmental issues. China's reduction in export
quotas of rare earth element raw materials is an example of this
and restricts a free market in metals. We invite the Government
to set out in its response the outcome of the investigation into
Chinese export quotas, as described by the Minister. We consider
that, to maximise the benefits of free trade, the Government should
ensure that restrictions in the trade of strategic metals are
discussed at an international level, through forums such as the
WTO, G-20 and the OECD. (Paragraph 59)
7. The increasing
global demand for strategic metals from emerging economies and
new technologies will be a significant factor affecting their
price, and therefore availability. Assessment of future demand
will be essential to assessing the potential scarcity, risk to
supply and future price of strategic metals. Assessments of future
demand should be part of the shared database we have proposed.
(Paragraph 63)
Functioning and operation of the market
8. Changes
in supply and demand can lead to significant fluctuations in the
prices of metals. While this may not be a problem for end users
or large companies we are concerned that small and medium enterprises
(SMEs) could suffer from unexpected large and rapid price increases.
The Government must ensure that mechanisms are in place to reach
out to SMEs across the country, a role previously fulfilled by
the Regional Development Agencies. We recommend that the Government
consult with SMEs using strategic metals to ascertain: (i) their
awareness of resource supply issues; (ii) how SMEs may be affected
by supply issues; and (iii) what information on resource supply
SMEs need to enable them to prepare for changes in the market
and maximise profitability. (Paragraph 70)
9. Stockpiling is
an unattractive option because it is expensive but it may be necessary
if the market fails because of sustained market manipulation by
a monopoly supplier. The Government should keep this policy under
review. (Paragraph 74)
10. The perception
of scarcity of certain minerals and metals may lead to increased
speculation and volatility in price and supply. There is a need
for accurate and reliable information on scarcity of metals. This
concern underlines the recommendation we have made, that the Government
should establish and regularly update a shared database to provide
such information. We are also concerned by reports of hedge funds
buying up significant quantities of strategic metals. We recommend
that the Government investigate whether there are increasing levels
of speculation in the metals markets and, if there are, their
contribution to price volatility and whether markets that allow
high levels of speculation, with associated price volatility,
are an acceptable way to deliver strategic commodities to end
users. (Paragraph 78)
11. We use this report
to bring the alleged activities of large dealers on the London
Metals Exchange to the attention of the Office of Fair Trading.
We would be concerned if a dealer were undermining the effective
functioning of the market and we look for assurance that the market
is functioning satisfactorily. (Paragraph 81)
REACH legislation
12. It
appears that there may be, amongst some small companies, a misunderstanding
of the REACH regulations and that consortia are being used to
register metals when this may not be required. We recommend that
the Government reassess the information and advice available to
small companies about REACH regulations, in particular information
about the most cost-effective means of registering strategic metals.
We also recommend that the Government examine whether these regulations
have become an unnecessary expensive burden inhibiting the market
in strategically important metals. (Paragraph 90)
Social and environmental impact
13. We
agree with the Minister that action on improving the social and
environmental impact of mining needs to be taken internationally.
We consider, however, that the operation of existing legislation,
in particular the Companies Act 2006, could be improved to ensure
that the social and environmental impacts of companies listed
in the UK and operating outside of the UK are fully reported.
We are concerned by suggestions that the Companies Act 2006 is
being ignored rather than implemented. We invite the Government
to explain what guidance is given to companies for reporting social
and environmental information, what measures are currently being
taken to monitor whether the information provided in companies'
business reviews is fit for purpose and what action is being taken
against companies that are not complying with the guidance. (Paragraph
102)
14. We accept that
international regulation is the best way to ensure that UK listed
extraction companies meet sufficient social and environmental
standards in their overseas mining activities. The Government
should advise the House when and where it proposes to raise these
issues in international forums. (Paragraph 106)
15. The
Extractive Industries Transparency Initiative and the International
Council on Mining and Metals are constructive initiatives, helping
to address the imbalance in national social and environmental
regulations. We encourage the UK Government to help grow their
membership through channels of international diplomacy and business
networks. (Paragraph 112)
16. Where labelling
schemes are possible, to trace a metal's origin from mine to market,
we conclude that the Government should support and encourage their
use. (Paragraph 113)
17. Given that many
of the world's strategic metals reserves are located in the developing
world, there is an opportunity for developing nations to benefit
from mining revenues. Fair royalties on mining sales will equip
governments with funds that could be used to help improve social
and environmental conditions. We recommend that the Government,
through the UK's representation at the IMF, promote IMF Structural
Adjustment Policies that give a fair deal on royalties from mining
to developing nations. (Paragraph 117)
18. Artisanal mining
presents specific challenges in conflict areas such as the Democratic
Republic of Congo. The OECD guidelines are in place to hold companies
to account for their actions overseas. We are concerned, however,
that there is limited follow up in cases where allegations of
inappropriate conduct have been upheld. The Government should
work with the OECD to ensure that guidance for the follow up of
investigations is in place and available to all National Contact
Points. (Paragraph 124)
19. In the US, under
the Dodd-Frank Act, companies are also required to produce a detailed
report on conflict minerals that they use. We recommend that the
UK Government evaluate whether similar legislation be introduced
in the UK to improve the social impact of mining in conflict areas.
(Paragraph 125)
Recyling
20. Using
a cradle-to-cradle approach to return products to manufacturers
at the end of their useful life is an effective means of managing
scarce resources, including strategic metals, efficiently. We
have been given examples of the financial benefits to manufacturers
that have tried this approach. We would like to see widespread
use of this approach in UK manufacturing, and intelligent product
design is key to its effective implementation. It is essential
to build networks and facilitate communication between manufacturers,
waste processors and designers. The work of the knowledge transfer
networks in achieving this should continue to be supported by
the Government. The Government should encourage the incorporation
of sustainable design thinking into the manufacturing and waste
processing sectors, thereby fostering a cradle-to-cradle approach.
(Paragraph 139)
21. We recommend that
where economically viable processes exist to extract or re-use
strategic metals from scrap materials, these processes be encouraged
by the Government. (Paragraph 142)
22. Assessing the
potential contribution of recycling strategic metals to meeting
demand within the UK is hampered by a lack of information. This
includes a lack of information on the strategic metals contained
in finished and semi-finished imports, as well as the amounts
and locations of strategic metals in the national waste stream.
We recommend that the Government conduct a review of metal resources—finished
and semi-finished goods and waste—in the UK. This should
include an estimate of the market value of these resources. It
would also be valuable to assess the movement of these resources
into and out of the UK. Provision of such information will not
only identify routes to the recovery of strategic metals, but
will also empower the private sector to realise the economic potential
of recovery and recycling. (Paragraph 154)
WEEE legislation
23. We
are pleased that the metal recycling industry in the UK is recycling
90%, by weight, of collected waste and that substantial quantities
of platinum, rhodium, palladium, gold and silver are being recovered,
mainly from recovered waste electrical and electronic equipment.
However, it is of great concern to us that some strategic metals,
which are often in products in small quantities, are likely to
be lost in the 10% not being recycled. (Paragraph 162)
24. We are satisfied
that the Government is working with industry stakeholders to see
if implementation of the WEEE directive could be improved with
a system of individual producer responsibility. We consider that
the Government should continue to work with key stakeholders to
identify other means of improving WEEE collection rates. In addition,
we recommend that the Government work with EU partners to carry
out a cost-benefit analysis of extending the WEEE regulations
to cover commercial and industrial waste. (Paragraph 163)
25. Given that scrap
metal and waste electrical and electronic equipment are a potential
resource for the UK, it seems nonsensical to be exporting them
abroad. The Government should be actively working towards minimising
the export of these materials. We are also concerned that the
export of scrap metal and waste electrical and electronic equipment
abroad for recycling is, in effect, exporting our environmental
problems elsewhere. We recommend that, where exporting has to
take place, the Government engage with the governments of the
countries importing these materials to encourage higher environmental
standards and adequate working practices for those processing
the goods material. (Paragraph 168)
26. We note that the
Environment Agency has responsibility for initiating enforcement
where the illegal export of WEEE is suspected. We recommend that
the Government ensure that the Agency is sufficiently resourced
to carry out this responsibility effectively. Given that WEEE
is often exported under the cover of re-use, the Government needs
to put in place safeguards to ensure that WEEE for export and
labelled for re-use is being used for this purpose. (Paragraph
171)
Domestic extraction
27. The
evidence shows that there are unexploited deposits of various
strategic metals in the UK but, in many areas, it is unclear whether
extraction is economically viable. The use of modern geophysical
prospecting methods could identify economically accessible reserves.
The Government should work with the British Geological Survey
to ensure that Government has a comprehensive and up-to-date understanding
of potentially valuable domestic mineral resources. (Paragraph
178)
28. Research is underway
into the potential to extract metals from industrial waste streams.
We recommend that, if these techniques become economically viable,
the Government ensure that current planning regulations do not
unnecessarily restrict the use of significant potential reserves
such as the 100 million tonnes of oil shale spoil heaps in West
Lothian. (Paragraph 179)
29. We consider that
domestic mining for strategic metals could alleviate the risk
associated with sourcing metals from external supply monopolies.
While any new mining in the UK is likely to have some environmental
impact, this is likely to be lower than it would be abroad and
so reduce the export of the UK's environmental impact. It is important
that the Government invests in the necessary research, to ensure
that future domestic mining has the least possible environmental
impact. However, perception of the environmental impact also matters,
and the public rightly needs to be certain of the effects of mining
in the UK. The mining industry has a role to play in demonstrating
that a modern mine, run to standards can be a good neighbour.
(Paragraph 185)
30. We are concerned
by reports that uncertainty and delay in the planning process
is preventing some mining companies from even considering prospecting
for reserves in the UK. The nature of mineral reserves is such
that they are where they are, that is, their location is a given.
Therefore any substantial local opposition and resulting rejection
of planning applications may result in mining companies pursuing
an overseas location. In order to make the most of the UK's valuable
domestic resources and to speed up the planning process, we recommend
that the Government classify mines, in particular those containing
strategic metal reserves, as nationally significant infrastructure.
(Paragraph 192)
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