Material criticality: an overview for decision-makers

Brochure by the International Round Table on Materials Criticality, IRTCMay 2020

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GlossaryBGS : British Geological SurveyBRGM : French Geological SurveyCRMs : Critical Raw MaterialsIRTC : The International Round Table on Materials CriticalityPGMs : Platinum Group MetalsREEs : Rare Earth ElementsTMS : The Minerals, Metals and Materials SocietyUSGS : United States Geological Survey

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Table of contents

Introduction 4

Which materials are critical ? 6

How is a criticality method established ? 8

Which indicators are used in criticality methodologies ? 10

Criticality assessments throughout the world 12

How industry manages criticality 14

Criticality and the Circular Economy 16

Criticality in practice – the COVID-19 pandemic 18

Summary and Outlook 21

Ru

Re

Ge

Ga

Cd

Ag

U

P

V

Ni

Cr

REE

V

Ni

Cr

REE

Te

Nb

Ti

Mo

Co

AI

Ti

Mo

Co

AI

Ta

Li

Th

Mg

Pb

Fe

Th

Mg

Pb

Fe

Pb

FeFe

Rh

K

Si

W

Mn

Ca

Si

W

Mn

Ca

W

Mn

CaCa

Pd

In

Pt

Sn

Cu

C

Pt

Sn

Cu

C

Sn

Cu

CC

1700 1800 1900 2000

4

ELEMENTS WIDELY USED IN ENERGY PATHWAYS . NB . POSITION ON THE TIME AXIS IS INDIC ATIVE ONLY (ZEPF ET AL . 201 1 )

F igure 1

Introduction Looking back at technological developments throughout the past centuries, we are living in an ex-citing era of technological innovation. Technological complexity has been increasing exponentially since the industrial evolution and is accelerating ever since. This has provided us great wealth, but at the same time has led to several societal challenges.

High levels of pollution, losses of biodiversity, and, of course, climate change are consequences of contin-ued economic growth worldwide. The first challenge we face now lies in the prevention of further envi-ronmental detriment, while maintaining stable econ-omies and increased welfare globally. A key strategy to achieve this is to increase energy efficiency and decrease dependency on fossil fuels.

This brings us to the second challenge of this era. Technologies, including technologies that contrib-ute to sustainable development, such as renewable energy and low-carbon mobility, rely increasingly on raw materials. Materials are not only used in in-creasing quantities, also a wider range of materials is used, which are often combined, resulting in increas-ingly complex products F igure 1 . Whereas some of these materials can be considered scarce, more pressing concerns about the use of raw materials is

the uneven distribution of reserves in the world, mak-ing many countries highly dependent on only a few exporting countries. Furthermore, mining can be en-ergy-intensive and can be associated with environ-mental and social problems, such as deforestation and child labor. Recycling of materials - which could contribute to a stable supply and less environmental and social burden – is often not taking place, due to the complex raw materials mixes within the products, making them difficult to separate, and lacking eco-nomic incentives. Finally, certain technologies, such as electric vehicles, wind turbines, and solar panels, have high expected growth rates. It is not guaran-teed that this increasing demand for raw materials can be met by an increased supply, considering that the development of new mines is a slow process and many minority metals do not provide sufficient reve-nue to drive mining operations.

Raw materials that play an important role in eco-nomic or technological development, while at the same time have precarious supply chains, are often called “critical”. The identification of these critical raw materials (CRMs) and the mitigation of their critical-ity has become an important task of researchers, companies, and policymakers in their pursuit of sus-tainable economic well-being.

Product

Global

Economy

Technology

Company

2008 20142009 20152010 2016

2016 GeoPolRisk & ESSENZ

2013 - ongoingGranta

2017EBP/Empa

2010GE

2010BGS

2010 - ongoingBRGM

2012BGS

2009NEDO

2010 - 2014KIRAM/KITECH

2011EU

2014EU

2017EU

2008NRC

2012 - 2015YALE

2012 - 2015YALE

2016 - 2017NSTC

2012BGS

2015BGS

2010Thomason

2010 - 2011US DoE

2011JRC

2013JRC

2012 - 2015Yale

2011 20172012 20182013 2019

Mineral C

ritica

lity

Low

Low

Medium

Med

ium

High

Hig

h

Impa

ct o

f Su

pply

Res

tric

tion

Supply Risk

A

B

5

The US National Research Council was among the first institutes to publish a method for assessing Raw Material Criticality, with the aim of compiling a list of CRMs for the US economy (NRC 2008). Following the NRC methodology, a material is deemed critical when it has both a high supply risk and a high impact of supply restriction F igure 2 .

In the years that followed, many more criticality as-sessments were conducted by governments, com-panies, and researchers. An overview of the most prominent methods (i.e. methods that are often cited and have a large influence in method development and decision-making) is provided in F igure 3 .

THE TWO-DIMENSIONAL CRITICALITY MATRIX AS DEVELOPED BY NRC (2008). MATERIALS ARE DEEMED CRITICAL WHEN BOTH THE SUPPLY RISK (ALSO CALLED “THE PROBABILITY OF A SUP-PLY DISRUPTION”) AND THE IMPACT OF A SUPPLY RESTRICTION (OR “VULNERABILITY TO A SUPPLY RESTRICTION”) ARE HIGH.

TIMELINE AND SCOPE (GLOBAL , ECONOMY, TECHNOLOGY, COMPANY, PRODUCT) OF PROMINENT CRITICALITY ASSESSMENT METHODS

Figure 2

F igure 3

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Which materials are critical ?

Criticality assessments tend to focus on non-energy minerals. In their review of 42 criticality assessments, Schrijvers et al. (2020) found that the materials most frequently included in the assessment are indium, gallium, cobalt, lithium, nickel, tellurium, copper, plat-inum group metals (PGMs) and rare earth elements (REEs). Only a few studies include other types of ma-terials than metals, such as aggregates, carbon fiber, chlorine, rubber, and wood.

As can be seen in F igure 4 , criticality studies do not provide a clear and consistent answer to the ques-tion of “which raw materials are critical”. As further discussed in the review by Schrijvers et al. (2020), the diverging results of criticality assessments can be at-tributed mainly to differences in the goal and scope of the study. For example, a material that is “criti-cal” for the development of batteries used in electric vehicles is not necessarily “critical” for the European economy as a whole , especially as long as the pro-duction of battery materials is widely taking place outside Europe. Therefore, criticality studies need to clearly describe the context in which materials are assessed for their criticality.

Many criticality assessments aggregate partic-ular groups of materials, as frequently seen in the case of PGMs and REEs. However, F igure 5 and F igure 6 illustrate that there can be differences in the criticality of specific materials within each group. For example, although osmium and samarium are often mined together with other PGMs and REEs, respectively, each of these elements have different properties and therefore are used in different appli-cations – resulting in different criticality scores.

Ideally, criticality studies should include all materials used by the system under study (e.g. the economy or the company), at all points in the supply chain, to highlight the supply bottlenecks. Even for a given material, varying material compositions should be evaluated separately, as they may differ in supply pathways and/or importance to the evaluated sys-tem. Given data gaps, however, materials are often evaluated only at the mining stage.

Rare earth elements

Light REEs

Heavy REEs

Cerium

Dysprosium

Erbium

Europium

Gadolinium

Holmium

Lanthanum

Lutetium

Neodymium

Prasedymium

Samarium

Scandium

Terbium

Thulium

Ytterbium

Yttrium

0 2 4 6 108 12 181614

Number of criticality studies

High criticality

Medium criticality

Low criticality

Number of criticality studies

Indium

Gallium

Cobalt

Lithium

Nickel

Tellurium

Copper

0 5 10 15 20 25 30

Platinum Group Metals

Iridium

Osmium

Palladium

Platinum

Rhodium

Ruthenium

0 3 6 9 12 15

Number of criticality studies

7

F igure 6

CRITIC ALIT Y DETERMINATION OF RARE EARTH ELEMENTS (REES), EVALUATED EITHER AS A GROUP, AS A SUB-GROUP (I .E . , “HEAVY” OR “LIGHT” REES), OR AS INDIVIDUAL METALS, IN CRITICALITY STUDIES CONDUCTED DURING THE PERIOD OF 2008-2019.

CRITIC ALIT Y DETERMINATION OF METALS THAT ARE MOST FREQUENTLY INCLUDED IN CRITIC ALIT Y STUDIES CONDUCTED DURING THE PERIOD OF 2008-2019.

CRITIC ALIT Y DETERMINATION OF PL ATINUM GROUP METALS , EVALUATED EITHER AS A GROUP OR AS INDIVIDUAL METALS , IN CRITIC ALIT Y STUDIES CONDUCTED DURING THE PERIOD OF 2008-2019.

F igure 4

F igure 5

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How is a criticality method established ?

Criticality assessments have been published in var-ious forms and styles. To make the differences be-tween these assessments more explicit, and to make future assessments more rigorous, a general frame-work for criticality assessment methodology could be applied F igure 7 .

As can be seen in F igure 7 , criticality studies can, depending on the goal and scope of the assessment, consider different types of risks, such as disrupted trade flows, material scarcity, price fluctuations, or reputational risks. In practice, many assessments consider some combination of these risks. The study goal also influences the way the results are present-ed, such as a list of critical raw materials, or a two-di-mensional matrix format (as in F igure 2 ), potential-ly including uncertainty ranges.

Constructing a list and/or ranking of CRMs raises the problem of aggregating different criticality indica-tors. There is no “correct” way to aggregate indica-tors, although scholars have argued for a multiplica-

tion of the “probability of a supply disruption” with the “vulnerability to this disruption”, as in classical risk assessments (Frenzel et al. 2017). Aggregation can mask the underlying indicator values, and therefore is not recommended for understanding sources of risk and identifying suitable mitigation options. An-other challenge in constructing CRM lists is in de-fining threshold values for criticality indicators (e.g., what constitutes “high” probability of supply disrup-tion, or “high” vulnerability to disruption ?).

Criticality studies often rely on geological and trade data that approximate the flows of interest for the assessment. Limitations of data quality, in con-sideration of the goal and scope of the study, can introduce significant uncertainty to criticality as-sessments. Uncertainty can be expressed by con-structing uncertainty ranges or “criticality clouds”, as suggested by Graedel et al. (2012). Alternatively, sensitivity analyses could demonstrate whether a raw material is likely to pass the criticality threshold value considering a range of datapoints.

DESCRIBE THE GOAL

AND SCOPE

CONDUCT THE STUDY

SELECT INDICATORS

AND DATA SOURCES

DEFINEAGGREGATION

DEFINE A THRESHOLD

VALUE

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WHAT IS AT RISK ?Global material access

A national economyA specific (group of) technology/ies

The revenue or reputation of a company

SELECT LEVEL OF AGGREGATION

(HIGH TO LOW)Establish a list of CRMs

Evaluate CRM scoring per criticality dimension

Evaluate scoring per criticality factorEvaluate scoring per indicator

IDENTIFY NEED FOR THRESHOLD VALUEMaterial is critical or not ?

Material has high/medium/low criticality ?

Material is more/less critical than others ?

SELECT THRESHOLD VALUEHighest 25%

Cluster analysisTop 10 list

Expert judgment…

SELECT AGGREGATION METHODEstablish a list of CRMs

AdditionMultiplication

SELECT WEIGHTING FACTORS

CONSIDER UNCERTAINTY RANGES AND/OR SENSITIVITY

ANALYSES

WHAT TYPE OF RISK IS ANTICIPATED ?Disrupted trade flows

A shortage of a raw materialFluctuating material prices

Legislation or a bad reputation due to environmental or social issues

in the supply chain

SUPPLY-RISK INDICATORS

MITIGATION INDICATORS

VULNERABILITY INDICATORS

WHAT IS THE OBJECTIVE OF THE STUDY ?

Identify hotspots in our material portfolioEstablish a list of CRMs for prioritisation

in R&DIdentify mitigation options

WHAT MATERIALS ARE EVALUATED ?

Ideally all materials used by the system at risk

Can be adapted based on available data

F igure 7

GENERAL FRAMEWORK FOR CRITIC ALIT Y ASSESSMENT

orsators

Product Compagny Technology/sector

diversity of mining/supply/import

depletion time/reserve/crustal

content

by-product dependency

degree ofexploration

circularity metrics

resourcecompetition

natural disasters

mining techn.

productiongrowth

materializationcapacity

exploitation conditions

local natural environ.

environ. impact

globalproduction

mining/prod.efficiency

price increase

exploitationconditions substitutability

market price

demand growth

trade restrictions

import dependency

stockpiles

price volatility

procurement strategy

strategic importance

price vs. total material cost

price vs.profit

ability to pass through cost

increase

apparentconsumption

resource efficiency potential

availability of hedging

options domesticdemand growth

price vs.GDP

use in emerging technologies

population using the material

capacity to innovaterevenue

impacted

market power regarding suppliers

demand vs.world production

internal demand

economic size of sector

investement in mining

geologicalspecificities

logistic restrictions

politicalstability

enviro./socialregulations

recyclability/ recycled content

Economy Global + Others Supply risks indicators Vulnerability indicators size= frequency of occurance 05 01

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INDIC ATORS FOR SUPPLY RISK AND FOR THE VULNERABILIT Y OF A SUPPLY D ISRUPTION AS USED IN 42 REVIEWED CRITIC ALIT Y STUDIES (SCHRIJVERS ET AL . 2020) . COLOURS REFLECT WHETHER THE INDIC ATORS HAVE BEEN USED IN STUDIES WITH A PRO-DUCT, COMPANY, TECHNOLOGY, ECONOMY, OR GLOBAL SCOPE . C IRCLE S IZES REFLECT HOW OFTEN THE INDIC ATOR HAS BEEN

USED. THE MIDDLE PANEL SHOWS INDIC ATORS THAT ARE SOMETIMES USED TO EVALUATE SUPPLY RISK AND SOMETIMES TO EVA-LUATE VULNERABILIT Y.

Which indicators are used in criticality methodologies ?

Criticality studies use a wide range of indicators to evaluate the probability of a supply disruption (or “supply risk”) and the vulnerability to this disruption. These indicators cover geological, economic, envi-ronmental, social, or political factors.

As can be seen in F igure 8 , “diversity of supply” (e.g., as measured by the geological distribution of reserves between countries, the distribution of raw material production shares between countries, or the distribution of raw material imports from various trade partner countries) is the most frequently used indicator in criticality assessments. This indicator is often used in combination with the Worldwide Gov-ernance Indicators to reflect the political stability of

producing countries. Greater diversity of supply al-lows supply chains to adapt more easily when the supply from one country is disrupted. Indicators re-flecting the relative scarcity of a material are often used as well. Another factor is “co-production” (i.e., where supply of one material is tied to another, thus creating potential imbalances in supply and demand that can result in physical shortages and/or price spikes). Environmental and social indicators are used to capture the risk of supply constraints imposed by laws and regulations (e.g., by legal hurdles to devel-op new mining operations), or by efforts to man-age reputational risks from material sourcing (e.g., if material sources are tied to armed conflicts, child labour, or other human rights abuses).

F igure 8

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The vulnerability to a supply disruption is more scope-dependent than the probability of the dis-ruption. Studies with an economy-wide scope often evaluate vulnerability based on the economic size of a sector affected by the supply disruption. Compa-nies evaluate their vulnerability based on the share of their revenue impacted by a supply disruption, and their ability to pass on cost increases to their customers. The substitutability of a raw material can be considered an indicator of supply risk or vulner-ability. A low substitutability within the market could affect the overall accessibility of a raw material, for example when the demand of technologies using the material is growing. On the other hand, companies that can use substitutes are less vulnerable to sup-ply disruptions or price spikes. Other indicators that have a mitigating effect on criticality are also used

within criticality assessments, such as the degree of exploration, stockpiling, recyclability, and access to recycled materials.

Indicator selection is limited by data availability. As seen in F igure 9 , most studies rely on data from geo-logical surveys, such as the annual reports of the US Geological Survey (USGS), the British Geological Sur-vey (BGS), and the French Geological Survey (BRGM). Data from the World Bank and the Fraser Institute are used to evaluate the political stability of supplying countries. Many studies also turn to industry reports (e.g. from Roskill) and judgement of experts in the field. Whereas some studies aim to minimize their reliance on expert judgment, the opinion of experts is often necessary to interpret the value of generic (trade) data to evaluate specific materials and products.

F igure 9

OVERVIEW OF DATA SOURCES USED BY CRITIC ALIT Y STUDIES (SCHRIJVERS ET AL . 2020) . BLUE NODES INDIC ATE DATA SOURCES , AND RED NODES REPRESENT CRITIC ALIT Y ASSESSMENT METHODS .

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Criticality assessments throughout the world

USAThe United States is both a producer and user of crit-ical raw materials. Its import dependence has grown over the last several decades. In 2008, the National Research Council published one of the first critical-ity assessments (NRC, 2008). In 2010 and 2011, the Department of Energy published assessments of criticality from the perspective of what is critical for clean energy (US DoE, 2011). In 2018 the US govern-ment published its first comprehensive list of critical minerals, leading in 2019 to the release of a national strategy to ensure secure and reliable supplies of critical minerals (US DoC, 2019).

BRAZILBrazil is a large mining and trading country. The Na-tional Mining Plan 2030 (MME, 2010), supported by a nationwide multi-stakeholder consultation, identified three groups of strategic minerals : 1) minerals for which domestic mining is not sufficient for the supply to important economic sectors, such as minerals for fertilizers (K and P), metallurgical coal for the steel industry and uranium, 2) minerals with a growing consumption by high technology-driven sectors, for instance renewable energies technologies, and 3) minerals of which Brazil has a global leading role as producer, such as iron ore and niobium. The Brazil-ian Centre for Mineral Technology (CETEM) and the Joint Research Centre of the European Commission with the support of the bilateral program “EU-Bra-zil Sectoral Dialogues” are studying the circularity, environmental and social impacts, and innovation trends of niobium as a critical (for the EU) and stra-tegic (for Brazil) material. Furthermore, in 2019, the Ministry for Mines and Energy established a broad value-chain perspective on selected minerals via workshops and consultations with other govern-mental institutions, producers and consumers, in or-der to update information and build public policies.

EUROPEThe list of CRMs for the EU and the underlying criti-cality methodology are key instruments in the con-text of the EU raw materials policy, a precise com-mitment of the Raw Material Initiative (2008). Since the publication of the first list in 2011 and subsequent updates (European Commission 2010, 2014, 2017), the EC criticality methodology has responded to the needs of governments and industry to better monitor raw materials and inform decision makers on how security of supply can be achieved through diversification of supply, resource efficiency, recy-cling and substitution. In order to prioritise needs and actions at the EU level, the list supports in ne-gotiating trade agreements, challenging trade dis-tortions and in programming the research and inno-vation funding under the Horizon 2020 and Horizon Europe schemes. The New Circular Economy Action Plan and the New Industrial Strategy for Europe, two of the main building blocks of the European Green Deal, have announced an upcoming Action Plan on Critical Raw Materials (2020 list), as well as stressed on the role of CRMs to achieve a climate-neutral, cir-cular and competitive economy.

AFRICAThere are no official material criticality assess-ments for African countries. However, reports from the United Nations, the World Bank and the African Development Bank highlight severe limitations on the provision of minerals required for domestic eco-nomic growth, such as limestone, clays, aggregates, gypsum, phosphates, nitrates and potash, which is-essential for agriculture and for the manufacture of industrial products such as ceramics, plastics, glass, paper or detergents (Calderón and Servén 2008 ; UNDP 2020). For example, Nigeria, the most pop-ulous African country, imports all the limestone it needs to treat drinking water, and all the gypsum to produce cement (Correia, 2018).

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CHINAChina has not conducted official material criticality assessments, but around 24 types of fossil energy and mineral resources were listed as “strategic min-erals” by the Ministry of Land and Resources (2016). China’s supply of various critical materials is not only facilitated by its rich endowment but also by its large metallurgical and refining industries. As the largest supplier and consumer of many critical materials, China values the cooperation between domestic and international markets for secure minerals sup-ply and sustainable materials use.

KOREAin 2009, the policy on CRMs of Korea was initiated by the Korean government through a demand-supply analysis of criticality, which distinguishes five factors of either growth or decline regarding instabilities in price, stockpiles, demand growth rate, supply risk, and urgency (Bae 2010 ; Hurd et al. 2012). In line with other methods that consider economic importance, criticality is relevant for private companies within each sector and level in the value chain, i.e., secur-ing raw materials, producing intermediate materials, and recycling. Moreover, due to the recent conflict with Japan in 2019 regarding raw materials supply for the semiconductor industry, which had an im-mediate impact on the Korean economy by a dis-ruption of supply, these economic-political decisions of securing CRMs become more important in Korea (Lee 2019)

INDIAIn 2011, Indian policymakers noted the need of un-derstanding critical and strategic minerals, including the use of rare earths in the energy sector. Over time, a handful of studies were published by think tanks, associations and other non-government establish-ments to understand the strategic requirement of minerals. In 2016, the Council on Energy, Environ-ment and Water (CEEW) developed a comprehen-sive framework (Gupta et al. 2016), which caught attention of policymakers and relevant agencies as it presented the 12 most critical minerals for the Indian manufacturing sector. This framework forms the basis of a long-term decision support tool which is being developed through active support from the Government. Furthermore, in 2019, India set up a joint venture called Khanij Bidesh Limited (KABIL) to ensure consistent supply of critical and strategic minerals through overseas acquisition.

AUSTRALIAAustralia is a strong mining nation. As its manufac-turing sector has been in decline, Australia’s inter-ests in criticality are as a supplier. Recently, Australia began facilitating research into its own potential re-sources of CRMs. For REEs, cobalt, and lithium, Aus-tralia is an important global supplier. Other CRMs are supplied in base metal concentrates exported to smelters and refineries capable of extracting these (e.g. indium, tellurium). For many CRMs large resources exist and new mines could be developed (e.g. tantalum, scandium). Recent research has been supported through Geoscience Australia, with a landmark report released in March 2019 (Mudd et al. 2018). In March 2020, the Australian Government launched the Critical Minerals Facilitation Office to support Australia’s potential as a critical minerals supplier, with a key focus to work on investment and trade opportunities with key trading partners (e.g. USA, Japan, Canada, China).

JAPANSince 2016, the Ministry of Economy, Trade and In-dustry (METI) has started criticality assessments of metals importantly used in Japanese industries such as automobiles and precision machinery by applying the approaches employed in the US and the EU (METI 2019). METI is preparing a guideline to support criticality assessments conducted by com-panies. For example, in 2017, rare earth elements, such as neodymium have been playing a critical role in those industries’ products, as China still accounts for 60% of the share of the importing countries of the elements, although efforts are done to diversify (JOGMEC 2018). Supply-chain management of CRMs at the corporate level will be increasingly important, and the guideline is expected to promote more com-panies to evaluate raw material criticality.

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How industry manages criticality

Raw material criticality is becoming increasingly im-portant for industries, especially in sectors with high growth rates, such as electronics, transport and spe-cifically electro-mobility, aerospace, and computer systems. Particularly in these sectors, material use has become ever more complex. Some raw materi-als have only recently begun to be used, and hence there is little historical knowledge of the develop-

ment of their markets. It is challenging to anticipate supply disruption in these rapidly evolving markets. This section presents an overview of industrial prac-tices and challenges in managing raw material criti-cality, as discussed at the IRTC Round Table on “How Does Industry Manage Criticality ?” at the The Miner-als, Metals and Materials Society (TMS) 2019 Annual Meeting and Exhibition on March 14, 2019.

THREE TYPES OF RISKS HAVE APPEARED RELEVANT FOR INDUSTRIESPhysical supply shortages of a material

A material fluctuates heavily in price

Reputational damage due to environmental or social impacts in the company’s value chain

KEY INSIGHTS FROM A COMPANY PERSPECTIVEWhile supply disruptions often occur further upstream in the supply-chain, companies usually often know only their first-tier suppliers.

In product design, performance generally has priority over supply risk considerations.

Supply risks might be managed by the procurement, supply-chain manage-ment, research and development, or financial department, or responsibility could be shared between multiple functions within the company.

Reputational risks are most relevant for Original Equipment Manufacturers (OEMs), who generally have more funds to investigate their supply-chains, and who have valuable consumer brands to protect.

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CHALLENGES REGARDING DATA ACCESSIBILITY AND DATA SHARINGPublic data have high uncertainties, while private data are expensive or only accessible to few specialized companies.

Public data need to be updated more frequently to reflect changes in the market.

More data, of higher quality, are needed on trade flows.

Data need to be sufficiently precise to provide at least an order-of-magnitude estimate and to highlight trends.

To facilitate data sharing, transparency needs to be balanced with confidentiality.

Companies need guidance to select the “right” assessment methodologies.

The dynamic nature of trade flows and the delayed availability of data requires approaches to evaluate supply risks qualitatively rather than quantitatively.

COMPANIES CAN MITIGATE SUPPLY RISKS VIA THE FOLLOWING STRATEGIESStockpiling

Find or develop substitutes

Establish long-term agreements with suppliers

Increase flexibility by relaxing material requirements

Vertical integration of the supply chain

Engage with multiple suppliers of each material

Establish contractual agreements that price increases are passed on to cus-tomers (escalation clauses)

Establish closed loop strategies to get access to (own) end-of-life products and reuse/recycle components with essential materials for the company

Screen potential suppliers, e.g. regarding sustainability

GOVERNMENTS CAN SUPPORT INDUSTRIES IN SECURING THEIR SUPPLYDevelopment of national stockpiles

Funding of high-risk and capital-intensive research project, e.g. for the devel-opment of substitutes or computational metallurgy

Provide data, e.g. trade data and geological data

Keep policies predictable

Enable and support trade between different regions in the world

Put policies in place that support and facilitate recycling

Consider innovative global solutions, such as developing an international leasing system

Stable & diverse supplier base

Stable & diverse manufacturing base

Material & technology

flexibility

Contribution to secure supply

Recycling of manufacturing scrap

Remanufacturing

Repair

Reuse

Primaryraw

materials Materials processing

Product manufacturing

Recycling

Use

DESIGNDISTRIBUTION

COLL

ECTI

ON

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Criticality and the Circular Economy

The transition towards a “circular economy” is often suggested as a means of managing supply secu-rity of critical raw materials. According to the Ellen MacArthur Foundation, the circular economy “is one that is restorative and regenerative by design and aims to keep products, components, and materials at their highest utility and value at all times” (Ellen MacArthur Foundation 2015). “Circularity” can be

achieved through “looping” strategies, like product repair and reuse, shared ownership, product refur-bishment or remanufacturing, and recycling of ma-terials from end-of-life products. In this section, the potential of circularity strategies to manage supply security of critical raw materials is discussed via four perspectives, as illustrated in F igure 10 (Tercero Espinoza et al. 2020).

F igure 10

FRAMEWORK FOR CONNECTING CIRCUL AR ECONOMY STRATEGIES TO RAW MATERIALS CRITIC ALIT Y. MATERIAL LOSSES , WHICH OCCUR AT ALL STAGES OF THE MATERIALS C YCLE , ARE OMITTED FOR CL ARIT Y ( TERCERO ESPINOZA ET AL . 2020) .

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1. Stable and diverse supplyMaterials for which production is concentrated among a few suppliers are often assessed as “crit-ical”. As illustrated in F igure 10 , recycling can help offset primary raw material supply, and thereby re-duce by-product dependency while increasing the diversity of supply. However, the economic feasibil-ity of recycling depends on the price of the primary material, which can be, especially for CRMs, highly volatile. Furthermore, recycling does not necessarily eliminate all supply risks, particularly if the supply of recycled materials is itself highly concentrated.

2. Contribution of recycling to supply

For materials deemed critical due to their geologi-cal scarcity, recycling can provide an additional and locally accessible raw material source and contrib-ute to an increased production growth potential. This is especially important for materials for which demand is expected to increase, such as materials used in low-carbon energy or mobility technologies. A caveat here is that the growth potential of recy-cled materials may be limited, due to challenges in the collection of end-of-life products and channeling them to appropriate recycling facilities. Some met-als are thermodynamically incompatible : if they are mixed in alloys it can be nearly impossible to sepa-rate them. Furthermore, as current recycling targets are often mass-based, they favor materials used in large quantities, such as cement, paper, plastics, iron and copper. CRMs used in smaller amounts are dissipated within the recycling routes of these base materials. To stimulate increased recycling rates of CRMs, recycling must be considered in the product design phase, and appropriate recycling targets and indicators must be developed.

3. Decreased demand growthDemand growth is one of the supply risk factors commonly considered in criticality studies. If the de-mand for a resource is growing in a slower pace, the dependency on primary raw materials can be de-creased. Circular economy strategies can reduce de-mand growth through increased resource efficiency, also via the “shorter loops” of the circular economy concept (e.g. increased longevity via repair and re-use, and shared ownership). However, compared to recycling, these shorter loops are often overlooked in the criticality discourse. Furthermore, new technol-ogies might be needed to enable them, and these technologies could themselves require CRMs as well. To facilitate increased resource efficiency, circularity strategies should be considered in the design phase of products, focusing on optimizing the efficient use of CRMs.

4. Material and technology flexibility and diversity

The transition towards a circular economy encour-ages substitution of primary resources to renewable and recoverable resources. Substitution is also an important strategy for managing supply security of critical raw materials. One potential pitfall could be that critical materials are substituted with equal-ly critical materials, or that the substitute materials come with trade-offs, such as increased environ-mental impacts. To facilitate substitution, manufac-turers should consider “design for flexibility”, e.g. by relaxing certain performance requirements. Material and technological flexibility and diversity can also be applied to the productivity of a company. Sud-den changes in demand, as for example experienced during the COVID-19 pandemic, could be absorbed by flexible product lines.

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Criticality in practice – the COVID-19 pandemic

The spread of COVID-19 over the globe has made the year of 2020 remarkable from the perspective of global trade, supply chains, and economic stability. This section provides an overview of observations of recent developments worldwide, which provide valu-able lessons for the future evaluation of CRM and the development of resilient supply chains.

Which systems should evaluate their material criticality ?• The scope of national criticality assessments is of-

ten defense, energy supply, or the (macro) econ-omy. However, as demonstrated by the COVID-19 pandemic, policymakers should also be con-cerned about which materials and products are critical for the national health care sector in case of pandemics, but also natural disaster and other incidents surging the demand for specific health related equipment. In the COVID-19 case, short-ages concerned among others respiration equip-ment and face masks, and the availability and potential supply disruption of drugs has received attention as well, with some countries rationing e.g. painkillers. Lessons learned from supply risk eval-uations in the health care sector could contribute to further development of criticality assessments for other sectors. Furthermore, certain materials that appeared critical during the pandemic will be increasingly stockpiled, possibly affecting other markets that rely on the same materials as well, e.g. by behavior of speculators.

• The material basis for Information and Communica-tion Technology (ICT) is an area that has increasing-ly come into the spotlight over the last years. With COVID-19 restricting travel and direct meetings, ICT – e.g. in the form of hardware, cloud storage, com-munication software, digital infrastructure, or data collection – has experienced an unexpected push that will accelerate the digital transformation even faster than expected. Materials that are crucial for these technologies thus might become suddenly

more critical, and/or R&D for substituting or recy-cling certain materials might be intensified.

What high-risk factors became apparent ?• Many European companies are dependent on the

supply of intermediate goods from China. With Chinese suppliers being shut down during the out-break of COVID-19 in China, some downstream Eu-ropean manufacturers experienced costly delays of a few weeks. Supply disruptions of intermediate goods are not often evaluated in current criticality studies, which usually focus on raw materials at the mining stage.

• Monopolistic positions of the supply of medical equipment led to shortages of testing capacity, due to lack of compatible ancillary materials (sol-vents, pipettes, etc) which were not substitutable by products from other suppliers. This illustrates that criticality studies should evaluate a broad range of materials and intermediate goods, and not only focus on metals or energy carriers, which is also important to consider in other sectors. Fur-thermore, product recalls of masks that did not fulfill quality requirements for use in hospitals demonstrate that not only the availability of prod-ucts in certain quantities must be safeguarded, but their quality as well.

• Geopolitical and logistic supply risks do not only relate to countries that produce materials and products, as supply disruptions can appear at different spots in the international logistic chains, for example, due to closed harbors and borders or delayed departures of trains and planes. This can emerge at all levels of the supply chains and encourages again an increased focus on interme-diate products.

• Resource nationalism plays a very important role in cases of emergencies and fear for nation-

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al security and supply. For example, the case of nations stopping the export of health care prod-ucts at borders has been a recurring topic in the COVID-19 discussion. Government intervention in markets – such as obliging firms to adapt their product lines, and/or sell products only on nation-al markets – increases in times of national and global emergencies; this trend could be persisting in the years to come.

How does COVID-19 influence future criticality assessments ?• Situations can change rapidly and unpredictably.

The dynamic nature of criticality is evaluated by several studies and graphically represented in Figure 1 1 . The cases of disruptive technologies, natural disasters, and pandemics must therefore be considered in criticality assessments, to avoid a potentially misplaced perception of supply se-curity.

• Trade data of 2020 should be handled with care, as the data will be biased by locked-down facto-ries on the one hand, and increased trade of ma-terials for the health care sector on the other hand. This should be considered if these data are used to evaluate trends or predict future supply risks.

How can we act to decrease the impacts of supply disruptions ?• Companies are generally concerned with main-

taining their operation in relatively short time frames, as illustrated by the fact that several companies experienced financial damages after the Chinese lockdown of a few weeks. There is a role of both companies and policymakers to find solutions to mitigate supply disruptions in mid or long-term time frames to limit economic (and in this case also health) damages within a country.

• Certain medical products are highly needed in situations of pandemics or other crises, while their demand under normal circumstances is low. Companies need to become increasingly flexi-ble to adapt to changing market circumstances. COVID-19 illustrated this by numerous companies that started producing respiratory equipment, hand gels, or face masks, while the demand for their regular products was put on hold. The speed in which the product line can be adapted is key and can decrease the impact crises have on eco-nomic activities.

• The probability of a supply disruption is difficult to predict due to its dynamic nature and the wide range of potentially relevant supply risk factors. However, the study of supply risk factors could greatly help rising the awareness for shortcom-ings of the current socio-economic system. In or-der to mitigate potential risks, it can be helpful to focus on the development of more resilient supply chains, that have a lower vulnerability to such a disruption.

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Summary and Outlook

Material criticality has become a widely-known concept only little more than a decade ago, and its global topicality since then has not decreased – on the contrary. With an increasing number of coun-tries committing to climate mitigation goals, and a rapid transition to electric mobility and digitalization world-wide, demand for technology metals is grow-ing and changes often appear quickly and unex-pectedly. Critical factors on the supply side, such as dependency on supplying countries, lacking access to recycled materials and ecological and social risks are also persisting. Trends towards increasing (re-source) nationalism, culminating in so-called “trade wars”, and an international health emergency have not helped to relax the situation recently.

From the research and discussions in IRTC, we were able to derive several lessons regarding the future development and implementation of criticality as-sessments. First, criticality assessments need a clear description of their goal and scope, including a de-scription of the anticipated risks that are considered within the study. Second, communication on critical raw materials should be more transparent regarding the used methodology, data sources, and uncertain-ty ranges, especially when criticality determinations have consequences on public decision-making. Third, further efforts should be put in the identification of best practices regarding data sources, indicator se-lection, aggregation methods, and presentation and communication formats.

Companies should make use of the criticality assess-ments conducted by governments, but should also investigate their individual exposure to criticality in their specific sectors, and react with individual miti-gation measures. Stakeholders interested in the eval-uation of raw material criticality would benefit from the availability of clear guidance in the formulation of their goals and scopes, the selection of potentially useful indicators and aggregation methods, and the interpretation of the outcomes. Such guidance could be a first step in improving the quality of criticality assessments, and fostering more standardized ap-proaches also on a global level. A decision model to assist decision-makers in assessing risks in their ma-terial supply chains is currently developed in IRTC’s follow-up project IRTC-Business.

Regarding the transition to a more circular economy of critical raw materials, we are only in the begin-ning of the process that will be needed for keeping CRMs in the economic cycle. Closing loops in today’s complex global supply chains will only be possible through sustained international collaboration. The COVID-19 pandemic offers us the opportunity to evaluate and rethink the current (socio-)econom-ic system, of which measures to tackle the ongoing ecological crises should profit as well. Continued work of policymakers, companies and researchers will be required to provide both the societal basis and the technical infrastructure for a sustainable future and to ensure a reliable long-term supply of the raw materials needed by society.

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AuthorsDieuwertje Schrijvers, Gian Andrea Blengini, Alex Cimprich, Weiqiang Chen, Vitor Correia, Roderick Eggert, Vaibhav Gupta, Christian Hagelüken, Atsufu-mi Hirohata, Anthony Ku, Min-Ha Lee, Gavin Mudd, Keisuke Nansai, Carlos Peiter, Jair Santillan Saldivar, Guido Sonnemann, Akanksha Tyagi, Patrick Wäger, Steven Young, Alessandra Hool

AcknowledgementsThe IRTC project has received funding from the EIT RawMaterials, supported by the Institute of Innova-tion and Technology (EIT), a body of the European Union, under the Horizon 2020, the EU Framework Programme for Research and Innovation. The au-thors would like to thank the IRTC consortium and all participants at the IRTC Round Tables for their valu-able inputs to the discussion.

IRTC-BusinessThe IRTC project (2018-2020) is continued by the project IRTC-Business, International Round Table on Materials Criticality in Business Practice (2020-2022). More information on https ://irtc.info

Coordinator contactAlessandra Hool ESM Foundation Junkerngasse 56 3011 Bern, Switzerland alessandra.hool@esmfoundation.org

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