Strategically important metals - Science and Technology Committee Contents

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)


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)


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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Prepared 17 May 2011