Critical Metals – Competitiveness and Security of Supply

Hannu Hernesniemi

No 88, ETLA Brief from The Research Institute of the Finnish Economy

Abstract: Abstract The USA, the EU and Finland have woken up to the fact that certain metals are critical in crises. Their production is concentrated in a few countries outside the USA and the EU. China controls 90–95 per cent of the production of rare-earth elements that are important to military technology and electronics. In Finland, the Critical Materials and Security of Supply monitoring group has listed the critical metals important to Finland. However, Finland is in an exceptional position among the European countries due to the fact the we have a competitive advantage in the mining of many critical metals and the processing of metals. Finland’s own mines and opened ore deposits yield battery materials (nickel, cobalt, lithium and graphite) and platinum group metals (with the most important ones being gold, palladium and platinum). Rare-earth elements can be used to make permanent magnets, which are needed in the jet engines of fighter aircraft, among other things. Fruitful development is being carried out in the recovery of critical metals (e.g. rare-earth elements) from scrap and municipal waste, and it will most likely lead to industrial-scale production within the next few years. However, Finnish industry uses a very wide range of critical metals and, particularly, ready-made components that contain them. How can the security of the supply of these materials be secured in a crisis? Businesses know their own needs the best. Their inventories of critical metals or components containing them could be increased by allowing premature recognition of a part of the purchase costs of inventories as expenses. Businesses could then immediately claim a tax deduction for the metals or components they purchase for their inventories. This would create an incentive to maintain excessive inventories, which would provide security in crises. For its part, the National Emergency Supply Agency could store some critical metals that would be shortest in supply worldwide in a global crisis. These inventories could then be exchanged for the metals and components containing critical metals that are required by Finnish industry.

Keywords: Critical metals; International Conflicts; Competitiveness; Security of supply (search for similar items in EconPapers)
JEL-codes: F52 O13 O4 Q34 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2020-04-22
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