Raw materials squeeze

An important topic at the 14th Asia-Pacific Conference of German Business in Vietnam this week is raw materials supply security. The head of DW's Business Department, Manuela Kasper-Claridge, spoke with the president of the Federation of German Industries (BDI), Ulrich Grillo, who is also chairman of Grillo-Werke, a family-owned business in the metals and chemicals industry.

Manuela Kasper-Claridge: Why is raw materials supply such an important concern for Southeast Asia?

Ulrich Grillo: Southeast Asia has a lot of raw materials, yet supplies are growing tighter even though production is high. The increasing industrialization of the countries in the region is increasing demand. Germany, as an industrialized country, doesn't have any of its own raw materials. So we're a natural partner for Southeast Asian countries to discuss this issue.

What raw materials are in short supply?

Grillo: Four or five years ago, there was, of course, a huge hype about scarcity of rare earths. That concern faded, but in fact all non-renewable raw materials are gradually getting scarcer. At some point, that might happen to rare earths again, but also to zinc, steel, or various ores. In short, the raw materials that don't grow back.

Is there any awareness of this issue in Asia?

Grillo: There is awareness, yes. In Germany it has been an issue for four or five years. In Southeast Asia, awareness is not as strong yet. But I would suggest that more than anything, we need fair, free trade, so that we are all in the same boat. The countries producing raw materials working together with countries that consume them to support each other. So that we address this as partners and avoid problems that, for example, occurred in Indonesia, where there are now export stoppages on 65 different raw materials to keep them in-country. Export stoppages and tariffs should be eliminated. Germany has very little in the way of metallic ores. The shift to renewable electricity supplies, electromobility - the Energiewende - these are only possible with an appropriate raw materials supply.

Germany has to look after its own raw materials supply in any event. Does Germany consume notably fewer raw materials than it did five years ago?

Grillo: Obviously, for anything expensive or in short supply, we will try to apply as much technology as possible to reduce demand. Urban mining is very important - recycling, in other words. Some 50 to 60 percent of industrial metal supply in Germany comes from recycled metal. That's a very big deal.

We see some countries, such as South Korea, organizing raw materials trading through state agencies. What do you think of that?

Grillo: The procurement of raw materials and assuring their supply security are key priorities for industry - that's not the state's job. That's why in Germany, we founded the Resource Alliance, in which 12 companies initially banded together. On the other hand, we also need politicians and the German government for support. Germany has recognized the importance of this issue, and Chancellor Angela Merkel and Economy Minister Sigmar Gabriel both have taken it up. Various raw materials partnerships have been set up with supplier countries Peru, Kazakhstan and Mongolia, to name a few, to ensure raw materials trading and also technology transfers, training, supply chain construction - various measures that help those countries build their economies.

Germany delivers value-adding processes and in exchange gains more raw materials supply security, then?

Grillo: We need the raw materials and the Germans help build up production and supply chains at the source. That includes technical training.

If the Southeast Asian region grows very rapidly, they will use up more raw materials. Could prices rise as a result?

Grillo: That's exactly the point. Consumption will increase, and if new supplies aren't tapped, raw materials will get scarcer. The only question is when.