In Search of an Appropriate Criticality Assessment of Raw Materials in the Dutch Economy: Underlying Causes and Sustainable Mitigation Strategies

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Chapter x
In search of an appropriate
criticality assessment of raw
materials in the Dutch economy
Elmer Rietveld and Ton Bastein
The Netherlands Organisation of Applied Science
(TNO), unit Strategic Analysis & Policy unit
Anna van Buerenplein 1, the Hague, Netherlands
Past events and predictions suggest the need for a methodology to assess
the criticality of raw materials to national economies. Existing criticality
methodologies were combined to develop a raw materials criticality
methodology for the Dutch economy, considering materials embedded in
intermediate or finished goods as well. Indicators are described
according to their relevance for assessment of risk for supply security,
financial damage or reputational damage for companies. The impact
aspect is based on value added in exported domestically produced goods.
1. Introduction to the necessity of raw material criticality assessment
Introductions explaining the need for raw materials criticality assessment
often cite the expected developments in population size, affluence and
technology1
. During the 20th century, population and wealth growth led
to an increase in the extraction of construction materials by a factor of
34, ores and industrial minerals by a factor of 27, fossil fuels by a factor
of 12 and biomass by a factor of 3.62. The global population is expected
to reach 9 billion by 2050 and 10.1 billion by 21003. A strong increase of
resource consumption in emerging and non-western economies can be
anticipated, where GDP growth rates of over 5% year are predicted for
the coming decades4. Consequently, a tripling of the global consumption

of materials has been predicted5. Foresight studies into the impact of
technology developments do not offer a prospect of a stable market, that
guarantees that the pace of R&D can match these population and
affluence developments6. Furthermore, the energy transition, widely
regarded as an urgent global challenge, is strongly dependant on raw
material supply7 8.
Disruptions to supply are perhaps the most drastic problem for economic
activities based on manufacturing, as opposed to private or public
services. In a manufacturing sector study commissioned by the Dutch
Employers Organisation for the High-tech equipment FME9, a large
proportion of the companies interviewed indicated that they had
experienced problems as a result of disruptions to the supply of their
most critical materials. These were mostly related to problems of their
intermediate suppliers and were thus seldom related to genuine problems
in the supply of raw materials
The use of raw materials in modern economies therefore deserves the
same careful consideration that has been given to labour, capital, energy
and R&D. They are a critical ingredient in maintaining the desired
quality of life as (mostly Western societies) have been fortunate to enjoy
in recent decades. The link between raw materials and societal impact
induced the Dutch national government to commission a study to get a
clear picture of both the direct and indirect dependence of the Dutch
economy on raw materials. Hence the Netherlands economy serves as
case study for the criticality methodology.
2. Common aspects of criticality assessments
The assessment of risks and vulnerabilities of raw materials seem to have
three common elements. These are: documenting the resources and
reserves, identifying the risks (supply disruptions combined with the
impact of these disruptions) that prevent the access to these resources
and the impact in case mitigating these risks is ineffective.
"Classical” risk analysis is principally concerned with investigating the
risks surrounding a plant (or some other object), its design and
operations. Such analysis tends to focus on causes and the direct

consequences for the studied object. Vulnerability analysis takes a
broader perspective and focusses both on consequences for the object
itself and on primary and secondary consequences for the surrounding
environment. It also concerns itself with the possibilities of reducing
such consequences and of improving the capacity to manage future
incidents"10 11. In general, a vulnerability analysis serves to "categorize
key assets and drive the risk management process"12 13.
The outcome of a risk analysis takes the shape of a vulnerability
diagram, such as the one depicted in Figure 1.
Figure 1: Classical risk analysis plot
The criticality assessment of the EC (and revised in 2016 by the JRC) at
first glance follows this general line of thinking: the assets chosen are
(biotic and abiotic) raw materials, the criticality investigated is the
probability for a supply disruption of a specific raw material, and the
consequences of that supply risk for the potential damage for the
European economy. The schematic vulnerability plot used by the EC is
given in Figure 2.

In this Figure 2, the term chosen on the y-axis “A measure of risk of
supply shortages” mixes the terms for risk and probability14. The supply
risk combines elements relevant for probability assessment (production
concentration for instance) with elements that are related to potential
mitigating measures (such as substitution and recycling). However, the
substitution options of a given material do not interfere with the
probability of a supply disruption of the material. To discard substitution
as an element of the y-axis of the EC-methodology15 may therefore be
considered. The y-axis could then be interpreted as a measure of the
probability of supply disruptions.
The “measure of economic importance or expected negative impact of
shortage” is a measure that is well in line with the Impact measurement
that is an implicit aspect of any risk analysis. In the current EC/JRC-
methodology schematically shown in Figure 2, substitution is introduced
here as well. It may be argued that the search for substitutes is a possible
subsequent action in case a risk is deemed to be critical, and that
therefore substitution may not be part of the EI-component of the EC-
methodology. However, the presence of a likely substitute for a given
material may indeed alleviate the economic impact of supply shortage,
and therefore constitute a relevant element of the EI-determination.
Figure 2 : Vulnerability plot16
As stated in another chapter, it can be interesting for further development
of criticality assessments of raw materials supply to study and interpret

indicators that have not yet been employed in these EC studies. In
studying other approaches, it is irrelevant for our current purposes to
comment in detail on the mathematics that are chosen to combine various
indicators to a common composed measure, as long as the method and its
underlying data are reported in a transparent way.
Various insightful comparisons between raw material criticality
methodologies and their outcomes have been published before17 18 19 20. An
observed overlap between methods was reported (Figure 3). In the
subsequent paragraphs, these review studies have been used implicitly.
Figure 3 : Often mentioned criticality criteria20
They turned out to be the most appropriate set of indicators for assessing
critical raw materials in the Dutch economy.
3. In search of appropriate supply risk factors for The Netherlands
In the Dutch situation the Ministry Economic Affairs interested in two
aspects: i) an assessment of the vulnerability of Dutch industrial on the
secured supply of (abiotic) raw materials, and ii) a strong support for

Dutch companies enabling them to assess their own vulnerability vis-à-
vis these supply issues.
Based on this, stakeholder consultation with the Dutch industrial
community9 resulted in a broader set of indicators, not solely focussing
on security of supply, but also on potential risks for profitability and
company reputation.
The vulnerability of the Dutch economy overall was assessed by
calculating the value added as a result of the use of a certain material.
The results of that assessment are briefly discussed in paragraph 5.
3.1 The security of supply perspective
The security perspective takes the view of governments, operating in an
increasingly tense geopolitical theatre21. Global population growth and
the increasing prosperity of the world’s population go hand in hand with
a strong increase in the demand for a wide range of raw materials. This
need is growing most rapidly in emerging economies, where raw
materials are required for both building basic infrastructure as well as to
meet the growing demand for consumer goods. Partly as a result of the
changing geopolitical relations caused by this, the degree of certainty
regarding the supply of raw materials for economies which are net
importers of materials (such as the EU-28 countries), is decreasing.
Numerous governments around the world are responding to the
increasing pressure on the stability of raw material supply by
participating more in primary mining, focusing on their own mining
industry, stock piling materials, committing more resources to research
and development into alternative materials, more efficient use of
materials and intensifying recycling. In addition to this transparent trade
in raw materials, a vital arbitrating role for the WTO is becoming
increasingly important. EU policy currently focuses on these last two
elements (efficient use and recycling) in addition to the intensification of
mining in the EU itself22.
The following set of indicators was introduced to the Dutch
governmental and industrial users to inform them about the security of
supply perspective.

Geo-economic factors: the R/P ratio
In principle, supplies of fossil and mineral raw materials are finite.
However, the quantities of mineral raw materials that could still
theoretically be extracted are not (yet) relevant to this discussion. What is
important is whether the combination of available exploration and
extraction technologies on the one hand and economic reality on the
other, allow the extraction of sufficient quantities of the minerals in
question per unit time. Estimating worldwide reserves is therefore a
complex and dynamic activity. Adjustments to estimates of reserves
(such as those published in the USGS Mineral Commodity Summaries)
appear to be carried out on the basis of administrative actions rather than
on the basis of an analysis of new proven reserves. An estimate of future
consumption plays no part whatsoever in the determination of reserves23.
To say the least the use of the R/P-ratio, the number of years of
production with the currently published reserves, is highly questioned as
a relevant indicator. Still, it was chosen as one of the indicators for long
term supply of security, with the observation that a proven reserve of
more than a thousand years (such as for rare earth elements) versus a
proven reserve of less than 20 years (a is the case for antimony,
strontium, zinc, gold, tin and silver), leads to relevant awareness to
designers of new applications.
Geo-economic: Companionality
Another important geological-economic characteristic of mineral raw
materials is the degree to which they are extracted as the main product
(or co-product) of mining operations or as a by-product. Many mineral
raw materials are only extracted as by-products (“companions”) of other
raw materials (the so-called “hosts”). In such cases, the profitability of
the mine will not depend on the extraction of the companion. Such
dependence can lead to a lack of market elasticity: a sudden increase in
demand (for example, as a result of technological innovation) will not –
if it concerns a by-product or “companion” – immediately lead to an
increase in production or the establishment of new mining operations,
unless the process efficiency of the companion extraction increases or if
full use is not yet made of all the companion raw material that can be
extracted24. A further consequence is that, if global demand for a host raw
material stabilises or even decreases (as is the case with lead), the extent

to which companions can be extracted will decrease, even when demand
increases.
A high level of companionality can therefore be considered a supply risk
for the longer term. Materials for which companionality is high are
almost all rare earth elements (except yttrium and cerium), all platinum
group metals (except platinum), indium, rhenium, tellurium, zircon and
cobalt.
Geopolitics: Concentration of (production and reserves of) materials
(HHI) in source countries
Many authors point to the influence of changing balances of power in the
world and the risks associated with these, in combination with the fact
the extraction of many mineral raw materials is limited to just a few
source countries25. The concentration of production in source countries is
generally considered a relevant indicator of supply insecurity in the short
term.
The degree of monopoly forming is expressed in most studies using the
so-called Herfindahl-Hirschman Index (HHI), which is composed of the
total sum of squares of the extraction concentrations per source country.
This is an accepted standard for concentrations in a sector (in this case,
source countries). The maximum value is therefore 10,000 (one country
produces 100% of the total volume). The EU study into critical materials
subsequently weighs the contributions to this HHI per country to the
World Governance Index (WGI). This increases the contribution of
unstable countries to this risk factor. In our assessment for Dutch
stakeholders we considered the separate reporting of this World
Governance Indicator worthwhile and relevant for industry and therefore
the HHI was not weighted by a countries WGI. An HHI of over 2500 is
considered to represent a situation of risky monopoly formation. Most
raw abiotic materials (in the Dutch study 18 out of 64 studies materials)
fall into this category.
The same comparison can also be incorporated into a risk analysis for the
long term: in determining the concentration of the geographical
distribution of economically viable reserves (as reported in the USGS
Mineral Commodity Summaries: this could be labelled HHIres. A high
reserves concentration may indicate a future supply monopoly. Striking

examples of a materials for which the reserve concentration is reported to
be much higher than the production concentration are the platinum group
metals (South Africa claiming high reserves) and phosphate rock
(Morocco claiming high reserves).
Geopolitics: Existing export restrictions (OECD data)
An interesting indicator for use in relation to a dominant position is the
extent to which export restrictions are imposed by a source country. The
data held by the OECD covers 72 countries (the EU is considered as one
region) for the period 2009-2012 and 80% of the global production of
minerals, metals and timber. The measures cover prohibitions on export
and export restrictions, export duties, licensing requirements and
obligations in relation to the local market. There is a strong dynamic
growth in such measures: 75% of all the measures that were in effect in
2012 had been introduced after 200726. The fact that China, holding
strong positions in many mineral markets, has proven to be willing to
exert their power and impose export restrictions, justifies that the supply
risk for minerals from China is considered higher than on the basis of
their market concentration alone.
End-of-life recycling input rate
In this chapter we focus on the problems associated with the supply of
raw materials. The import of materials and goods leads to the formation
of a so-called “urban mine” in our society, a supply of raw materials
stored in our infrastructure, capital investments and the products we
consume. In the coming decades, recycling will become an ever more
important source of materials and must ensure that the depletion of
resources proceeds at a slower pace26 1.
Harvesting those materials may make Europe less dependent on the
import of raw materials. In essence, ‘urban mining’ leads to an increase
in the number of source countries (decreasing HHI) generally form well
governed countries. This indeed reduces supply risk. Since well
documented knowledge about the volumes and origins of recycled metals
1 It is important to note that the role of recycling is important here because of the large proportion of
metals in the list investigated. Thanks to good process technologies, metals often retain their quality.
For biotic materials, this situation is more complex. Where recycling does take place, it will often
lead to a decline in quality and hence value. The recycled material is in such cases no substitute for
“virgin” material.

is difficult to retrieve, the end-of-life recycling rate as such was used in
the Dutch study as such.
3.2 The financial perspective: price volatility and value chains
Businesses often have an elaborate system in place to secure their supply
chain. At the same time, these supply chains are not very transparent.
Beyond a first tier supplier the actual knowledge about the composition
of components is evaporating quickly. In the Dutch situation, many
industries are back-end assemblers or OEM (Original Equipment
Manufacturers) who indeed have a limited knowledge about the
chemical, elemental composition of their delivered processed materials
(such as chemical compounds and base metals), components and other
intermediate products (intermediates), as schematically shown in
Figure 4 below.
Figure 4 : Illustrating different stages of use of raw materials in the value chain
Companies may be involved at each of these levels and obtain their
materials and goods from each of these higher levels. Therefore an
analysis of the vulnerabilities of raw materials only (opposed to all type
of goods) provides a limited assessment of the overall vulnerabilities
found in the supply chain. A wide availability of basic raw materials,
combined with a bottleneck in the supply chain (e.g. the presence of a
very limited number of suppliers of intermediate products) can cause a
vulnerable situation. That study9 reported an abundance of acute supply
disruptions which were unrelated to raw material supply disruption, but
in fact were connected to other problems found further up the value
chain.

Besides a limited knowledge about the impact of supply disruption of a
single raw material, this lack of knowledge also prevents a company to
assess the impact of price increases and price volatility on its business.
Operating profit: price volatility of (raw) materials
Increasing and varying raw material costs affect operating profits and –
particularly in the case of an uneven playing field – competitiveness.
Concerns about operating profits are therefore important at both the
corporate and national level.
It is a fact that the price volatility of mineral resources is high and has
increased since the turn of the century. Price volatility can have various
causes. It may arise as a result of an imbalance between supply and (for
some applications rapidly) increasing demand, export restrictions or
speculation on the commodities market28.
The effects on the supply side include uncertainty about the profitability
of mining investments, which leads to shortages in the long term. In this
sense, price volatility could be an indicator of the risk of supply
uncertainty in the long term. The same applies to the phenomenon of
“supply shocks” (moments where a sudden decline in production leads to
an immediate price increase).
On the demand side, price volatility may lead to problems when prices
cannot be passed on to customers and where a “level playing field” for
producers in different countries does not exist. The influence of this
depends strongly on the contribution made by the cost of this raw
material to the cost of the final product.
To determine effects on operating profits one needs to know the price
volatility per raw material and an estimation of the quantities of a raw
material that are used. Price volatility can be expressed in different ways.
In a TNO study29, MAPII, the Maximum Annual Price Increase Index
was introduced, as a measure of the maximum relative price increase that
has occurred during the past 20 years. The MAPII represents the highest
price increase per year in that period, divided by the price of raw

materials at the beginning of the year with the highest price increase. A
MAPII of 1.0 means that the price rose by 100%, i.e. doubled, during a
given year during this period. Using the MAPII, the impact of price
volatility on a product or product group can be determined as follows:
MAPII x
((¿. P 2011x)×TSx)×W(import )
V(import)
∑
x=n
m
¿
In this formula, MAPIIX is the maximum annual percentage increase in
the price of a raw material (determined for the period 1990-2011),
P2011x is the price level in 2011 of the raw material, TSx is the
characteristic proportion of a raw material in a particular product group,
W(import) is the weight of the volume of imports of all products within a
product group and V(import) is the value of imports of all products
within that product group. The important parameter TSx is further
elaborated in paragraph 4.
The price developments are based on fragmentary data gathered from the
USGS Mineral Commodity Summaries. The price developments reported
there are based not only on a variety of sources but also on different
product qualities. Notwithstanding these limitations, however, it is
possible to generate a clear picture of the extent to which prices may
fluctuate from year to year in the worst-case scenario.
3.3 The reputation perspective: CSR and externalities
Even when supply is guaranteed and price volatility has no major impact
on business operations, conditions in source countries may still have an
adverse effect on business in case a company’s reputation is at stake.
This is particularly an issue when the primary mining operations
(including financing local conflicts, poor working conditions and local
environmental pressure) can cause a negative image of companies using
those materials, even when the business involved is much further down
the value chain, and is not primarily involved in mining or processing of
these raw materials. The regulation issued by the European Parliament is

just one example of the widely felt need to initiate supply chain due
diligence30. Especially the increasing impact of social media makes
companies increasingly vulnerable for such upstream issues. In the Dutch
context it was felt desirable to define and present a number of indicators
that provided some insight in these reputational aspects.
Environmental impact of resource extraction
Awareness of the environmental impact of the mining and refining of raw
materials can be important in – for example – being prepared for
criticism and in seeking possible alternatives that are less damaging to
the environment. Since the results of a study performed in The
Netherlands links raw materials with their use in products (including
cases when an individual company may not be aware of this), such
information with regard to raw materials at the product level will be
included in the self-assessment tool to be made available to companies31.
A methodology that could be employed is the use of midpoint indicators
(following the ReCiPe method and the EcoInvent databases) for raw
material production (indicators for a wide variety of environmental
impacts can be retrieved with this method). In terms of environmental
impact, gold and the platinum group metals stand out far beyond other
raw materials (caused by greenhouse effect but also particulate matter
formation during mining)
Performance of source countries in terms of human development
(Human Development Index HDI)
One of the factors indicating the relationship between potential social
problems and raw materials is the human development index (HDI)2. The
HDI is roughly composed of: life expectancy, average years of schooling,
expected years of schooling and gross national product per capita.
When including this parameter, the potential reputational damage for
using tantalum and cobalt are prominent: the important role of the
African Great Lakes Region and the extremely low HDI in that area
means that these materials stand out negatively.
2 “The Human Development Index (HDI) is a summary measure of average achievement in key
dimensions of human development: a long and healthy life, being knowledgeable and have a decent
standard of living.” The HDI is compiled and reported by the UN Development Programme

Regulations pertaining to conflict minerals
A factor with a particular influence on corporate reputation, with
repercussions for the entire supply chain, is the debate on the import of
conflict minerals. The European Commission has designed a system that
should lead to an end of imports of certain minerals (tin, tantalum,
tungsten, gold (TTTG)) from conflict areas (‘conflict-affected and high-
risk areas’ means areas in a state of armed conflict, fragile post-conflict
as well as areas witnessing weak or non-existent governance and
security, such as failed states, and widespread and systematic violations
of international law, including human rights abuses”) by European
refiners and smelters. These regulations are similar to those adopted by
the US government via the Dodd-Frank Act32. The Dodd-Frank Act
imposes specific requirements for the traceability of tin, tantalum,
tungsten and gold with respect to the export of products containing these
materials to the United States33. That means that information about these
four materials is relevant not only to reputation but also as regards the
export situation.
When such materials become available through recycling processes, the
dependence on source countries will be reduced, provided that recycling
and any subsequent processing of the recycled materials takes place
locally. The precise details of the nature and above all the location of
recycling are currently very unclear.
4. Placing value added on the x-axis
The impact of a supply chain disruption of raw materials is based on an
economic perspective, that directly relates it to themes such as
competitiveness, the labour market and the trade balance. The previous
paragraph focussed on the criticality indicators for the y-axis. This
paragraph deals with the way the economic impact on the Dutch society
has been addressed, on the x-axis.
It is commonly accepted that15 the impact of raw material supply
disruptions are best expressed on the x-axis by the value added in an
economy. To do this in a best possible way, a relatively detailed relation
(CN 6-digit and CPA 6-digit product groups) was determined between
raw materials and their application in processed materials, intermediate
and final products. This allows to express the impact in value added per

sector and domestic export per product group, clarifying the impact on
the labour market and global competitiveness respectively. The TSx
parameter discussed in the subparagraph about operating profit
represents the “typical share” of a raw material in the total net weight of
a product group (for methodological detail, see29), illustrating the need to
link the 6-digit product groups to raw materials.
Information linking products and raw materials is available from
literature3 and auxiliary sources4 for most products. Such shares can be
checked or corrected by more detailed but limited databases such as
EcoInvent5. However, the analysis is initially concerned with the
qualitative link between raw materials on the one hand and products on
the other. When estimating the economic impact, we assume that the
amount of a specific raw material in a given product is irrelevant, but that
each material is essential for the quality of the delivered product and
therefore the related competitiveness of the company concerned. Such
allocation of raw materials to products is of course not unique to the case
for The Netherlands. Therefore, this assessment could easily be extended
to an analysis on European scale, thereby providing an (more detailed
and accurate) alternative for the EC-analysis based on the rough
economic impact using NACE2 data and share of application of a
material expressed as TSx.
5. An appropiate criticality assessment applied to the Dutch
economy
The Dutch case study results are shown in Figure 5. In this plot the short
term criticality was expressed as:
Criticality = HHI * (WGIweighted + OECD restrictionsweighted) * (1-%EOL-
RR)
The short-term security of supply of raw materials was considered low in
the Dutch study where the source country concentration is high AND
where the source countries have a mediocre World Governance Index
3 For a full list, see TNO (2015)
4 Such as trade databases such e-to-china.com and werliefertwas.de
5 https://www.ecoinvent.org/

and have proven willing to impose export restrictions AND where
recycling of end-of-life products is low.
Figure 5 Short term criticality for The Netherlands: security of supply in
relation to added value per raw material
The importance of iron, copper and aluminium exceeds that of other raw
materials. These materials are used in a large number of products which
have added value in almost all sectors, this makes them the most
important materials in our economy.
Furthermore, the significant importance of silicon, gold, silver and
important alloying elements such as nickel, tin, magnesium and zinc
stands out. In addition, a group of rare earth metals (lanthanum, cerium,
neodymium, praseodymium and scandium) have been identified as
important to the Dutch economy.

6. Challenges ahead: biotic materials, future supply and
substitution
Three important challenges that could shape the analytical face of
criticality assessments in the coming years are discussed in this
paragraph.
6.1 Should substitution be a part of vulnerability assessments?
As was discussed in paragraph 2, substitution is a rather common factor
in criticality analyses. It is debatable whether this factor is relevant in
assessing supply risk, but its use in assessing vulnerability and impact is
rather straightforward: the availability of a readily available and decently
performing substitute certainly alleviates the vulnerability of a country in
case of a supply disruption. The level of detail and the type of assessment
is however very different among the various reports.
Habib34 states: “the assessment of the substitutability of a given resource
can in our view benefit from a more specific and technology oriented
perspective. Often, substitutability is assessed at the elemental level, i.e.,
substitution of one element by another based on key physical/chemical
properties of the element as such, e.g. substitutability of copper by silver
or aluminium based on their conductivity properties or the like, and
mainly qualitatively assessed based on expert judgements. We argue that
assessing the vulnerability of being dependent on a specific resource
including the options for, and ease of, substituting one resource by
another, needs a more comprehensive assessment. Such an assessment
should rely on a holistic understanding of product development and
technology development and address ways to substitute not only the
elemental resource as such, but the complex technological solutions to
creating the features and functionalities of the products and systems of
concern.”
This implies a meaningful broadening in the scope of substitution. The
example used in their paper (alternative technological solutions for direct
geared wind turbines without needing permanent magnets based on
neodymium and dysprosium) indeed suggest that the substitution options
for NdFeB-magnets are rather large and thus the resulting impact low.
This means that from a societal point of view, one may indeed choose a

broad scope for substitution and easy substitution indeed may alleviate
risks for a society being deprived of essential functionalities.
In practical terms however, this use of substitutes is often difficult from
the point of view of an individual company. In the example of lighting
for instance, it can be suggested that all imaginable light sources (LEDs,
CFLs, conventional bulbs, candles) are alternative solutions for the same
function and therefore substitutes. It would however result in completely
changed industrial value chains and therefore such substitute definition is
too wide. The JRC methodology published in 201615, bases itself on a
‘drop-in’ technology type of substitution, enabling companies to move to
a different product without significantly altering the value and production
chain. Some alloying elements (such as Nb, W, V) can be interchanged in
similar process equipment and deliver comparable performance. Though
such examples may exist, from a company point of view substitution
always leads to considerable impacts such as decreased performance,
changing process parameters, increased costs. Therefore, in the Dutch
study, solely focussing on a company perspective, substitution was not
incorporated in vulnerability assessments.
Helbig et al.18 conclude in their review of criticality methods that
substitution is the single most frequently applied indicator for
vulnerability. The overview that they provide demonstrates that the
availability of substitutes, their performance or the share of products for
which substitution is considered impossible is all assessed by expert
opinion (on 3,4 or 5 point scales). Most of these expert opinions are
based on the previously indicated direct substitution of materials for
other materials. This consensus among cited publications is in contrast
with the JRC-methodology currently employed: this search for
substitutes is based on literature searches or commonly known
substitutes (so as to ensure ready availability instead of potential long
term options of low TRL). In comparison with the known expert based
substitute indicators, it may be questioned whether the complex
calculations suggested actually provide meaningful or desired detail.
6.2 How could a future outlook could affect the economic impact?
Incorporating future developments will increase the relevance and
decrease the reliability of every criticality assessment. As was stated34:

“criticality is a situation/condition of the system under study due to some
property leading to criticality. Thus, criticality is a dynamic instead of
static phenomenon which is subject to change over time. This is also
because the indicators used to assess criticality are dynamic in nature”.
All existing methodologies lack elements that are either future-oriented
or dynamic in nature. Several criticality reports claim to have included
dynamics, i.e. changes over time, in their assessment8 34 35 36 37 38 some of
them related to the supply side and some of them to the (economic)
vulnerability side. The suggestion made previously to include
assessments about reserves and reserve concentration in countries may
already be considered a primitive method to include dynamics in the
supply risk assessment. Some34 use this difference between current HHI
and potential future HHI (based on reserve data) as a method to ‘predict’
the future development of HHI.
The reports that focus on one particular sector (for instance the defense
sector, or the renewable energy sector) can use technology roadmaps for
their dynamic assessment: the predicted future demand for that particular
application can be compared to the current need. In case this future need
is significantly higher, or even exceeds the current total production of a
particular material, the probability for a future supply shortage is
relatively large. Consequently, the impact on the sector itself is also
large, since the predicted roadmap will face barriers in order to be
executed. For a more general assessment, such as the one for the EU-28,
such an approach for a future-oriented assessment can obviously not be
followed. Erdmann36 uses the known change of the share of German
usage vis-à-vis global usage and the change of imports to Germany
(during a 5-year period preceding the analysis) as elements (both of a
10% weighing factor) in the vulnerability assessment. In their analysis,
the materials Gallium, Rhenium and the Rare Earth elements are
assessed to be very critical partly because of the growing consumption as
a raw material in Germany (growth rates between 50% and 80% between
2004 and 2008) in combination of course with the already high
consumption share of the German industry. These data are extracted from
trade statistics.

In16, the authors use the instrument of future price development and
volatility as measures for future availability development. Based on
historic trend and regression analyses the authors conclude “that future
price trend and volatility are significantly influenced by a number of
current material specific and general economic indicators, such as
country concentration, secondary production or interest rate.” The
relations seem to be different for different materials, with especially the
minor elements with specific applications, and potentially high growth
rates and non-transparent price formation mechanisms following
different predicted routes than the major metals. All in all, the inclusion
of price developments for a broad assessment of raw materials proves to
be complex and partly relates to the same, rather simple indicators such
as country concentration and speculation in non-transparent markets.
Olivetti39 reviews the modelling methods that have been applied to
estimate future materials use and availability-derived supply risk within
studies of materials criticality. These authors point to the fact that all
aspects commonly used in criticality assessments are expected to change
over time, and that therefore proper future-oriented assessments require
careful modelling. They observe that “it is not uncommon to find that
“importance” and “availability” characteristics of materials markets
are nevertheless treated as intrinsic materials properties whose values
are reducible to simple economic or geophysical accounting. Worse, this
oversimplification can be an attractive short-cut in criticality policy
discussions. The challenge for those who study criticality risk is to find
techniques for assessing importance and availability that avoid this
shortcut, giving appropriate consideration to the techno-economic
dynamics of real systems.”
The paper states that flows of future consumption are often estimated
using empirical models of historic consumption of the material based on
simple time-series regressions. These models may be enriched by
scenarios including predicted population and GDP growth. The system
dynamics and agent based modelling approaches indicate nevertheless
that analyses of future vulnerabilities and supply issues require in-depth
research and modelling activities and display significant uncertainties.
Future-oriented assessments of supply beyond the use of R/P-ratios
might be based on the relation between investments in exploration and

the actual discovery of raw material40. When it comes to the development
of the reserves there should arise a relationship between the amount of
investments put into detecting reserves (exploration phase) and the extent
to which significant finds are made. Richard Schodde, Managing
Director, Minex Consulting, noted in his presentation to the IMARC
conference in 201441 that this is not the case, and that gives cause for
concern. An analysis of expenditure in the exploration of metal and
minerals could in principle contribute to gaining a better insight into
long-term availability. After all, when there is no investment in the
search for new supplies then no new supplies will be found.
Due to the difficulty in predicting the relationships between exploration
and eventual mining investment, and the fact that only sketchy data is
available for a few commodities, the extent of investment in exploration
can currently not be used as an indicator for long term supply security.
6.3 How could the picture of raw material assessment be completed
by biotic materials ?
The topic pertaining to the difference between biotic an abiotic materials
is expected to return in the coming years. Recent work has elaborated the
difference in assessing them42 43. Looking at the indicators discussed in
paragraph 3, a bold but reasonable statement can be made that there is in
fact relatively little difference in the assessment methods between the
abiotic and biotic realm. It may look like a paradox to observe that there
are huge differences between the required data and corresponding
analysis when looking at production capacities, reserves and end-of-life
recycling-input-rates. At the same time, all the other indicators are either
completely similar (concentration of source countries, MAPII, export
restrictions, human development, environmental performance) or
irrelevant (companionality, conflict minerals). Furthermore, the
challenges faced by sustainably recycling biotic materials may be very
different compared to the abiotic materials, but they are also less
complex44. The brunt of the additional analytical work to assess materials
like natural rubber, soy, cacao, tropical wood etc. instead of molybdenum
or copper thus focuses on production capacity and reserves. Elements
like geophysical properties, pathogens, degradation and other ecosystem
issues come into play when considering biotic production capacity.
However, these elements are essentially related to a particular piece of
land, not to a particular material. Therefore, it may be assumed that using

especially country concentration factors (such as HHI) encompasses all
of these seemingly very different factors45. For, a high country
concentration of harvesting may lead to a high (local) impact of
pathogens, local droughts, etc. The most important difference between
biotic and abiotic materials ironically seems to be the difference between
the crust and the surface.
7. Summary and concluding remarks
Many publications report assessments of raw materials criticality.
Though most authors develop ‘proprietary’ assessments, the overall
approach and the nature of the indicators is remarkably similar. Also for
the Dutch situation a set of indicators was chosen based on these
commonly adopted indicators (paragraph 3).
The general approach of a risk analysis (determining a probability of an
event and the consequences if that event takes place) is taken by many
authors. Regarding the common elements of the assessments, there are a
number of conclusions that can be drawn.
With respect to assessing the probability of supply disruption we can
conclude:
-Recycling is used as an indicator for the supply risk axis in
several studies. Though no evidence was found that recycling
already impacts supply risk, it is considered relevant to include
recycling because it often indicates the availability of a
secondary source in consumer countries.
It is worthwhile devoting effort to assess production volumes and
countries for secondary materials, so that these data can be
included in the generally accepted HHI indicator.
-Distribution of reserves over the globe (as opposed to
distribution of current production) is already used in several
papers, and may be considered for future use for long term risk
analysis. The EU-28 is the proper podium to identify long term
upcoming monopolies and consider action, given the reliability
and cost of data gathering and the purpose of the analysis
enabled by that data. For shorter term company actions, reserve
distribution is indeed less relevant.

-The companionality (“by-product issues”) is an indicator already
used in several studies and is worthwhile considering in future
vulnerability assessments, though more effort should be paid to
the insight in current refining capacities and the extent to which
the maximum levels of companions are currently harvested.
With respect to assessing the impact of supply disruption we can
conclude:
-Substitution options are commonly employed as an element that
has an impact on the vulnerability; a debate about the level at
which substitution is considered (material for material, product
for product, functionality for functionality, process for process)
is not conclusive which renders this indicator prone to varying
interpretation. Short term substitutes of high TRL that do not
significantly alter production processes may be a narrow but
workable definition on a company (and thus economy and added
value) level.
-The relation between raw materials and the direct impact on the
economy benefits from deep knowledge about the actual
application of raw materials in products; the estimates currently
employed in the EC-assessments (gross allocation of raw
material use to NACE sectors) should be refined to a great extent
with some existing methods. Our study assessing the Dutch
vulnerability has made an attempt to allocate raw material use in
products, product groups and subsequently sectors in great detail.
Further refinements however are desirable to identify more in
detail which economic actors face risks in times of supply
insecurity.
Several papers conclude that these vulnerability assessments should pay
more attention to the time-dynamics of the raw materials market and
should provide more data about the future situation. Some methods that
were discussed require deep (agent-based or system dynamic) modelling
and it is obvious that such methods require further development to be
meaningfully deployed for substance (i.e. elemental) criticality
assessment. The use of exploration investments was also shown to be
non-conclusive. However, it might be considered to use trends of
production and consumption over limited historic time-series in order to

highlight issues for materials that have experienced high demand growth
under stagnating mining capacity or unexpected high price volatilities.
A clear conclusion can be dawn regarding the supply and value chain of
raw materials. With only a few exceptions, none of the criticality
methodologies pay attention to the potential vulnerability caused by
processes in the value chain between the actual mining process and the
final consumption by a company or country. This grossly overestimates
risks at the mining stage and underestimates the vulnerabilities due to
production concentrations in the refining industry and the manufacturing
industry further down the value chain. The emphasis in the raw materials
debate may therefore in some cases focus on the wrong materials and
wrong players and actions. In the current EC-methodology this is partly
addressed by at least assessing whether the ‘next step’ in processing (i.e.
refining) of materials exhibits higher country concentration than the
mining stage. Ideally, for strategic value chains, such analyses should be
taken beyond the point of refining and dive deeper in the value chain. An
example of such an approach is given in Figure 6 below, illustrating the
vision of the US Department of Defence regarding the dependence on a
foreign value chain.
Figure 6 : Rare earth based permanent magnet supply chain as shown by US
Department of Defense.

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