The document discusses analyzing the criticality of 54 materials in OECD countries from the present to 2030. Criticality is assessed based on economic importance and supply risk. Economic importance considers a material's use across sectors and the value of those sectors. Supply risk factors in substitutability, recycling rates, production concentration, and political stability. The analysis finds 21 currently critical materials and identifies which sectors they most affect. It proposes incorporating future sectoral changes and production shift scenarios to project criticality to 2030. Policy efforts to increase substitutes, recycling, and political stability could help mitigate supply risks.

1. CRITICAL MATERIALS
IN THE OECD TO 2030
Renaud Coulomb, Post Doctoral Researcher
r.coulomb@lse.ac.uk

2. AGENDA
I.The Challenge
II.Analytical Framework
a)Economic Importance
b)Supply Risk
III.Static Findings
a)Sectors Affected
IV.Introducing Dynamics
a)Sectorial Changes
b)Production shifts
V.Policy efforts

3. I) THE CHALLENGE
Raw materials are economically important as sectors such as energy, transportation, and communications crucially rely upon them.
Three mega trends:
1)Increasing demand driven by emerging markets (see Krausmann, 2009)
2)New technologies require large amounts of rare materials (DERA, 2012)
3)A slowdown in high-grade deposits discoveries after 2000
The current and future criticality of individual materials will depend on their economic importance and how likely they are to face supply disruptions.
In order to inform effective policy we set out to map material criticality for 54 materials in the OECD countries up until 2030.

4. II) ANALYTICAL FRAMEWORK
Our methodology draws on the previous research: EU (“Critical Raw Materials” 2010, 2014), US (“Minerals, Critical Minerals, and the US Economy” 2007), UK (“Material Security” 2008), etc., focusing on a new scope of countries and adding dynamics.
Criticality is assessed across two dimensions:
•Economic Importance determined by:
•Use of materials across sectors
•Value added of these sectors
•Supply Risk determined by:
•Concentration of production
•Distribution of reserves
•Political stability of major producers/holders of reserves
•Recycling rates
•Substitutability

5. II-A) ECONOMIC IMPORTANCE
•퐴푖푠 - The share of consumption of material i in end–use sector s
•푄푠 - GVA of sector s
A material that is used heavily in a sector that constitutes a large part of the economy will have a relatively high Economic Importance index value.
Index is calculated for 54 materials in 17 Megasectors (Q) with total GVA of 20% GDP.
Data sources: share of consumption (EU 2014, USGS 2014, etc), GVA (OECD).
퐸푐표푛표푚푖푐 퐼푚푝표푟푡푎푛푐푒푖= 1 푄푠푠 퐴푖푠푄푠 푠
i – material s – sector

6. II-B) SUPPLY RISK
•휎푖 - Substitutability = 퐴푖푠휎푖푠푠
•휌푖 - Recycling rate
•푆푖푐 - Production shares by countries
•푃표푙푆푡푎푏푐 - Political stability by countries
The Supply Risk index is high if a material has few substitutes, low recycling rates, and production is concentrated in politically unstable countries.
Data sources: substitutability and recycling (EU 2014, USGS 2014 etc), production (BGS 2014, WMD 2014 etc), political stability (WGI 2014)
i – material s – sector
c – country
푆푢푝푝푙푦 푅푖푠푘푖=휎푖1−휌푖 (푆푖푐)2푃표푙푆푡푎푏푐 푐

7. III) STATIC FINDINGS
*Natural Rubber

8. III-A) SECTORS AFFECTED
21 critical materials are:
Antimony, Barytes, Beryllium, Borate, Chromium, Cobalt, Fluorspar, Gallium, Germanium, Indium, Magnesite, Magnesium, Natural Graphite, Niobium, PGMs, Phosphate Rock, REE (Heavy), REE (Light), Silicon Metal, Tungsten, Vanadium.
The following Megasectors are affected (number of critical materials affecting each Megasector):
Metals (Basic, Fabricated & Recycling) (18), Other Final Consumer Goods (16), Chemicals (12), Electronics & ICT (10) ,Electrical Equipment (7), Road Transport (7), Plastic, Glass & Rubber (6), Mechanical Equipment (5), Construction Material (4), Refining (2), Oil and Gas Extraction (2), Aeronautics, Trains, Ships (1), Beverages (1)

9. IV) INTRODUCING DYNAMICS
The project entails making projections up until 2030.
To meet this requirement the framework should be modified to account for the underlying dynamics of material supply and demand.
The team suggests that:
•The dynamics of Economic Importance are captured by incorporating the OECD forecast of sectorial composition into the analysis.
•The dynamics of Supply Risk are incorporated by introducing three supply scenarios based on current production shares and reserves.
Other factors that can affect criticality in the future: exploration of land to increase reserves and lower concentration, new extracting technologies etc.

10. IV-A) SECTORIAL CHANGES
Tomorrow’s economy will be different from today’s, criticality of materials will be affected by changes in sectorial composition driven by:
1) Emerging technologies
•Thin layer photovoltaics (gallium, indium), fibre optic cable (germanium), seawater desalination (palladium, titanium, chromium), micro capacitors (niobium, antimony), etc
2) General economic trends
•Diminishing share of agriculture
3) Policy focus
•Green policies

11. IV-B) PRODUCTION SHIFTS
The producers of the materials currently used in the OECD are likely to change over time as reserves are depleted.
This should be accounted for in Supply Risk estimates and the team therefore suggests evaluating three scenarios of future production:
1)production sources are assumed constant at current levels (i.e. the countries of origins and their respective share of total supply does not change over time)
2)production converges towards reserves distribution as stocks deplete (i.e. the countries with abundant reserves become more important for global supply in the future)
3)reserves distribution only matters (i.e. supply risk depends on the origins of reserves NOT where current production occurs)

12. V) POLICY EFFORTS
To mitigate supply risk either recycling efforts need to increase or new substitutes will have to be found.
The following changes will suffice to make materials non-critical:

13. *S – substitutability, higher S -> higher risk
*R – recycling, higher R -> lower risk
A1. PRODUCTION CONCENTRATION
S = 0.77
R = 0
S = 0.93 R = 0

14. A2. SUBSTITUTES AND RECYCLING
Potash S = 0.32 R = 0 HHI = 2300
Barytes
S = 0.98
R = 0
HHI = 2603
Natural Graphite
S = 0.72
R = 0
HHI = 7300
Cobalt
S = 0.71
R = 0.16
HHI = 4600

15. A3. POLITICAL STABILITY INDEX
The main index used for Political Stability is the Worldwide Governance Indicators (WGI) calculated by WB in 2014.
The index consists of six dimensions of governance:
•Voice and Accountability
•Political Stability and Absence of Violence
•Government Effectiveness
•Regulatory Quality
•Rule of Law
•Control of Corruption

16. A4. POLITICAL STABILITY VS WGI

17. A5. RULE OF LAW VS WGI

18. A6. POLITICAL RISK AND CONCENTRATION IN OECD
•Average WGI among OECD countries – 2,7, among the rest – 5.3.
Mexico
Fluorspar
18%
Silver
21%
Greece
Perlite
19%
Turkey
Borate
45%
Feldspar
21%
Perlite
18%
Share of production
012345WGI_finalMEXICOTURKEYGREECEITALYISRAELHUNGARYS. KOREASLOVAKiaPOLANDSPAINCZECH REPUBLICSLOVENIAPORTUGALESTONIAFRANCECHILEJAPANUnited StatesBELGIUMUNITED KINGDOMIRELANDGERMANYAUSTRIAAUSTRALIACANADALUXEMBOURGNETHERLANDSSWITZERLANDDENMARKNORWAYNEW ZEALANDSWEDENFINLAND

19. A7. SUBSTITUTABILITY VS RECYCLING

20. A8. SUBSTITUTABILITY VS CONCENTRATION

21. A9. RECYCLING VS CONCENTRATION

22. A10. SUPPLY RISK FOR RESERVES

23. A11. ECONOMIC IMPORTANCE USA VS OECD

24. A12. ECONOMIC IMPORTANCE JAPAN VS OECD

25. A13. ECONOMIC IMPORTANCE EU VS OECD

26. A14. STATISTICAL APPENDIX
Variable
Mean
Std. Dev.
Min
Max
Supply Risk
Subst.
Recycling
HHI
HHI_wgi
EI
Supply risk
1.11
1.04
0.1
4.61
1
Substitutability
0.69
0.18
0.32
0.98
0.27
1
Recycling
0.09
0.12
0
0.51
-0.16
0.25
1
HHI
3327
2344
629
9801
0.88
0.07
-0.14
1
HHI_wgi
1.73
1.51
0.22
5.99
0.95
0.09
-0.08
0.91
1
Economic Importance
0.07
0.02
0.03
0.11
0.14
0.13
-0.04
0.14
0.14
1
Correlation matrix

27. A15. DATA ISSUES
•Economic importance index
•Sectorial composition (GVA of Megasectors)
•Data is currently available in GTAP breakdown
•Higher level of disaggregation is desirable for more accurate results (ISIC up to 4 digits)
•Breakdown of end-uses of materials can differ by countries and for OECD
•Data used currently is based on data in EU report (2014), USGS (2014)
•Supply risk index
•Input data may differ for the OECD countries: breakdown of end-uses, substitutability, recycling rates
•Alternative measures can be used: political risk (WGI vs PRS)

28. A.16 REFERENCES
DERA Rohstoffinformationen, 2012, Energy Study 2012, Reserves, Resources and Availability of Energy Resources, Germany.
Krausmann, 2009, Growth in global materials use, GDP and population during the 20th century
EU, 2010, Critical Raw Materials for the EU, Report of the Ad-hoc Working Group on defining critical raw materials, 30 July
EU, 2014, Report on Critical Raw Materials for the EU
NRC, National Research Council, 2008, Minerals, Critical Minerals, and the U.S. Economy, National Research Council of the National Academies
UK, 2008, Material Security Board Ensuring Resource availability for the UK economy
U.S. Geological Survey, 2014, Minerals Yearbook 2010
World Mining Congress, 2014 World Mining Data
World Bank, 2014, World Governance Indicators