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Metals preparing for jump

Author Denkstatt
Metals preparing for jump

Boyan Rashev is one of the leading experts in environmental and resource management in Bulgaria. Since 2007, he has been a managing partner at Denkstatt, the most experienced consulting company in Bulgaria specialising in ESG (Environmental, Social, and Governance), decarbonization, product sustainability, and reporting.

His professional expertise lies in sustainable development, environmental management, ecosystem services valuation, circular economy, air quality, climate adaptation and policies, and natural resource management.

He holds a Bachelor's and Master's degree in Environmental and Resource Management from Brandenburg Technical University in Cottbus, Germany. He has also studied at Sofia University "St. Kliment Ohridski," the University of Natural Resources and Life Sciences in Vienna, and the Central University of Venezuela in Caracas. In 2012, he was a finalist in the national competition for young business leaders, Next Generation.

On the last day of March, The Economist magazine published a short article with a clear message in the title: 

"Copper is the Missing Element of the Energy Transition." 

This is just one of a series of publications and events that indicate a growing awareness of the physical realities of climate policies and the shift from fossil fuels to renewable energy sources and total electrification. Simple facts like the one that an electric car requires about 7 times more critical raw materials than a conventional car, or that wind and solar power plants require 2 to 15 times more critical raw materials per installed unit of capacity than conventional ones, have been known for a long time. At last, the challenges related to their extraction are beginning to receive more attention in the reports and plans of leading global organisations and governments.

The International Energy Agency has published its latest report on the energy transition, Energy Technology Perspectives 2023. According to the report, investments must immediately increase to at least USD 4.5 tn per year from about USD 1 tn in 2022. Unlike previous times, the materials of critical importance are now receiving attention. According to the authors, investments by mining companies in the period 2023-2030 must exceed 7 times the average levels for the period 2016-2021. All final investment decisions for opening hundreds of new mines must be made between 2023 and 2025, which virtually means right now.

Even European bureaucracy is waking up to the issue. We now have a draft version of a new regulation - the Critical Raw Materials Act. Its goal is to create the necessary conditions for the EU to reduce its dependence on critical raw materials for the energy transition, digitization, and the defence industry. The idea is for Europe to mine, refine, produce, and recycle much more lithium, nickel, rare earth elements, copper, and so on.

All these plans sound great, but a quick look at reality shows a different picture: 

Despite the political mantras, companies simply are not investing enough in new mining! 

As a norm, mining companies must invest at least around 20% of their gross profit in exploration and development of new reserves and deposits. However, according to the latest report by BMO Capital Markets, since 2012-2013, there has been a sharp decline, and in recent years, we are at record-low investment levels - around 10%. These investment volumes will not only fail to lead to the necessary exponential growth in mining but will also struggle to maintain its current levels, especially for the most common metals.

What is Bulgaria’s potential?

Mining and metallurgy are leading economic sectors in Bulgaria, providing over 10% of the gross domestic product annually, significant employment, and the highest wages outside of major cities and the IT sector. Whole regions owe their stable socio-economic development to these sectors.

Bulgaria has great opportunities, primarily related to copper. The global copper market in 2022 was worth around USD 300 bln, while all other critical raw materials for the energy transition combined do not exceed USD 150 bln. To put it bluntly, the shortest description of the so-called critical and strategic raw materials for Europe from an economic point of view is "Copper and others."

This is an incredible opportunity for Bulgaria because the country is third in Europe in copper ore mining, the third-largest exporter of unrefined copper in the world for 2021, and a hub for metal recycling in Europe. Copper sales and copper products account for about 10% of Bulgaria's exports, and more and more companies in our country use copper produced in Bulgaria to create high-value products. Unlike most EU countries, Bulgaria still has a qualified workforce capable of performing the work described above, as well as an energy system capable of providing the necessary abundant, reliable, clean, and cheap energy for mining and metallurgy.

Copper is at the forefront, but Bulgaria is in a strong position on the continent when it comes to other metals as well. The country has significant capacity for basic metals - steel and aluminium. It is also among the leading countries in mining, production, and recycling of lead and zinc. Additionally, there are significant deposits of manganese and tungsten that are currently underutilised.

What should be done in the short and long term?

The Critical Raw Materials Act is an opportunity for Bulgaria to take a strategically important place in the European Union. It remains only to use it wisely. In general, conditions for doing business in the relevant sectors - mining and metallurgy - need to be significantly improved. This will allow domestic companies to quickly reinvest their profits here, and the country will also attract major international players in the sector. Of course, the local market needs to attract manufacturers of components or end-products from the relevant metals to keep a larger portion of the chain and the value-added.

Mining and metallurgy today face the challenge of dealing with the legacy of communism, fears, prejudices and bureaucracy. Mineral resources are state-owned, and the state should want to benefit from their extraction by providing favourable conditions for private mining companies.

Everything goes back to the lack of a clear strategy for industry development at the national level. There is no understanding of the industry's benefits. On the one side, this shows insufficient work by companies with the public, but also a lack of support for the industry from the state. Permit issuance deadlines are not mandatory for the administration, creating an unpredictable environment for the businesses and hinders planning. Going through all required procedures takes a long time, even without appeals. There is a need for unambiguous interpretation and application of legislative requirements by all institutions. Intra-institutional procedures are unclear. On top of it all, there are contradictions in European regulations - for example, the Critical Raw Materials Act will come into direct conflict with nature protection regulations. The result is that the energy policy of the EU and at national level are becoming increasingly unattractive for energy-intensive industries.

However, I am optimistic. I know many geologists, miners, and metallurgists - for them, there are simply no insurmountable obstacles. Bulgaria has all the prerequisites to take advantage of the world's hunger for metals. It remains only to do it!