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FWC Sector Competitiveness Studies EU NFM Industries 89

3 Competitiveness issues for the EU NFMindustry

This chapter presents an analysis of the key competitiveness issues facing the EU NFM

industry, particularly from a policy and regulatory perspective. Each of the key issues

identified are covered as follows: (i) a short description (scope, purpose, implementation,

etc) and discussion of the development of the policy/regulation; (ii) an assessment of the

impact of each Regulation to date on the EU NFM industry; and (iii) an international

comparison, assessing international differences between framework conditions andwhether they differ in their impacts on EU and non-EU NFM industries.

The key competitiveness issues identified as impacting the EU NFM industry include:

Environmental policies;80

The EU ETS (and other climate change policies);

Energy policy and markets;

Trade policy and access to raw materials;

Recycling;

Research, development and innovation policies.

All these issues are discussed in more detail as follows.

3.1 Environmental policies

3.1.1 Introduction

This section assesses the most important EU environmental policy Regulations and

Directives applicable to the NFM industry. The environmental policies have far-reaching

implications that significantly increase the EU NFM industrys costs. Three

environmental policies have a significant impact on the EU NFM industry. These are:

1. Environmental standards (e.g. pollution control policies (IPPC/IED));

2. Waste (including treatment and recycling);3. Protection from harmful substances for the environment and human health

(REACH).81

80 Environmental polices are limited in this study to environmental standards, waste and REACH.

81 This is not an exhaustive list of EU environmental policies. Many other policies such as eco-labelling, green procurement,

etc. are also relevant for the NFM industry and will likely have an impact on the operations of companies in the industry.

However, within the context of this study, it was agreed to focus on a selected number of environmental policies seen as

having a substantial impact on the industry at present and in the future.


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FWC Sector Competitiveness Studies EU NFM Industries90

Environmental standards

NFM producers are subject to, and have to comply with, multiple environmental

regulations, which are taken into account during environmental permit

applications/updates and environmental inspections. The investments, administrative

costs and effort needed for compliance have an economic impact on the NFM industry.The impacts on the NFM industry arising from the IPPC/IED Directive, the Air Quality

Framework Directive and Water Framework Directive are discussed below. The impacts

of waste policies and REACH are assessed in more detail in the next sections.

The IPPC Directive (2008/1/EC), the Integrated Pollution Prevention and Control

Directive, requires all NFM installations to have a permit (activities listed in Annex I

of the Directive). Installations should reach a certain efficiency level (the BAT

Reference case) in energy use and emissions to receive a permit. For some NFM

producers this may require investments in production and higher electricity usage.

With the recast of the IPPC Directive (i.e. Industrial Emissions Directive), adopted by

the EU in 2010, the permit-setting will become more harmonised and transparent. It

will also require a better understanding of how to apply an integrated approach

between different environmental policies and site-specific needs;

The Ambient Air Quality Framework Directive (2008/50/EC) aims to minimise the

harmful effects on human health by monitoring and assessing the air quality and

reducing the levels of pollution. The 2004/107/EC Directive is particularly relevant to

the NFM industry as it focuses on monitoring arsenic, cadmium, mercury, nickel and

polycyclic aromatic hydrocarbons in the ambient air;

The Water Framework Directive (2000/60/EC) reorganises water management in the

EU and sets minimum water quality standards. It identifies priority hazardous

substances (PHS), especially cadmium and mercury, and priority substances (PS),

notably nickel and lead. These PHS are subject to measures aiming at the cessation of

discharges, emissions and losses of these substances. PS emissions are subject to

point or diffuse source control measures.

Waste - including treatment and recycling

The Waste Framework Directive (2008/98/EC) was revised in 2008. It establishes a legal

framework for the treatment of waste within the EU. Complementing legislation to the

Waste Framework Directive are, among others:

the Waste, Electrical and Electronic Equipment (WEEE) Directive 2002/96/EC);

the Waste Shipment Regulation (Regulation (EC) No 1013/2006);

the Packaging and Packaging Waste Directive (Directive 94/62/EC);

the Batteries and Accumulators Directive (Directive 2006/66/EC);

the Restriction on Hazardous Substances (RoHS) Directive (Directive 2002/95/EC),

focussing on certain hazardous substances in electrical and electronic equipment.

Only a small number of waste products generated by the NFM industry are classified as

hazardous. Despite this the waste legislation, also relating to including non-hazardous

waste, has implications for the industry as a whole. The most relevant ones include:

Additional costs incurred by the industry due to stringent technical provisions and

costs (e.g. for the land-filling of hazardous wastes);

Concern that the recycling of NFM falls under the scope of the Directive via the co-

incineration definition issue. This results in an obligation for the NFM industry to

comply with stricter limit values;


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Additional costs for the industry for packaging and labelling of scrap materials; and

Inefficiency in the application of shipment legislation relating to hazardous and non-

hazardous waste for recycling.

Various EU pieces of waste legislation, such as the WEEE Directive currently togetherwith the RoHS Directive in co-decision, help to reduce the environmental impact of the

NFM industry. They promote secondary production, or the recycling of scrap, which is

used in 40-60% of EU NFM output. This is significantly less energy and CO2intensive

than primary production within the industry. The WEEE helps to stimulate the use of

scrap materials and to preserve strategically important scrap for the EU market. The

WEEE, as most of the EU waste legislation, follows the principles of the Waste

Framework Directive. It includes hierarchical levels - namely the 3Rs: Reduce, Reuse and

Recycle - as the basis of waste management strategy. It also allocates responsibility for

waste to the producers and stakeholders involved in the lifecycle of waste products: in

other words, the polluter-pays-principle.82

There is increasing global and EU-level pressure on raw materials supply. This leads to

increased recycling and efforts to find an adequate balance between primary production

and secondary sources as the basis for sustainability of the NFM industry in the EU. The

EU Raw Material Initiative (RMI) was a first step in this direction. Various

environmental legal acts and initiatives aim at dealing with industrys demand for

secondary raw materials. This includes the WEEE and the Waste Shipment Regulation

(see in Section 3.4), the classification and identification of second hand and end-of-life

goods, and improvement of collection schemes and management of secondary raw

materials.

REACH

In 2007, the REACH (Registration, Evaluation, Authorisation and restriction ofChemicals) Regulation (EC 1907/2006) came into force. It aimed at improving the

protection of human health and the environment, while maintaining the competitiveness

and enhancing the innovative capacity of the EU chemicals industry. The NFM inorganic

chemicals and fall under the scope of REACH. In consequence certain chemical

substances, such as hexachloroethane, may not be used in the manufacturing and

processing of NFM. The main impact of REACH on the NFM industry is that all metals

have to be registered, thereby increasing the administrative burden. The vast majority of

NFM need full registration as per the Annex IX and X requirements of the REACH

Regulation. Also relevant are the administrative costs involved in joint financing of the

testing, the completion of file documents and other ad hoc consortia related activities.

Examples include the following:83

1. The nickel sector/consortia have spent around EUR 12 million to prepare 11

registration dossiers of chemical substances and two registration dossiers of

intermediates;

82 European Commission, DG Environment, The Producer Responsibility Principle of the WEEE Directive, Final report

produced by Okopol, IEEE and RPA analysts, August 2007.83

Source: Eurometaux, communication on letter to Eurometaux from the Consultants about comments Eurometaux made on

the Draft Final Report of this NFM competitiveness study.


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FWC Sector Competitiveness Studies EU NFM Industries92

2. The copper sector/consortia invested in total EUR 11 million of which EUR 8 million

for a voluntary risk assessment and EUR 3 million in three REACH consortia.

So far, about 25 REACH consortia have been formed within the NFM industry over the

last three years to cover about 750 chemical substances and to cope with the registrationphase. The companies spend an estimated EUR 25,000 per substance, depending on the

profile of the substance and availability of existing data. 84Given that 25-30 REACH

consortia have been formed, the overall cost would be in the range of EUR 150-200

million for the NFM industry as a whole.85

The consequences of this legislation to the NFM industry can be categorised as follows:

additional costs incurred by the industry due to extra administration of hazardous

properties;

additional costs for registration (i.e. testing, registration fees, dossier costs);

additional costs for testing and back testing of products produced;

investments in alternative production processes: manufacturers of NFM products are

not allowed to use of certain chemical substances and manufacturers have to adapt,

change and/or restructure their processes accordingly;

constraints on production and supply of certain NFM compounds like chromium salts

due to the REACH authorisation process.

3.1.2 Impact and international comparison

There are substantial differences between environmental policies within the EU,86leading

to inadequately harmonised internal market conditions87

. In addition, environmental taxes

tend to differ across Member States. Compliance costs may therefore vary substantially

across Member States. This will continue to be the case as long as EU environmentallegislation is based on Article 193 of the Lisbon Treaty, formerly 176, of the EC Treaty.

The majority of environmental policies concentrate on pollution prevention, waste,

recycling and improvements to quality of life. The EU is clearly at the forefront of

environmental policies development and implementation, having set sustainable

development as a clear overriding principle for economic growth. While such policies add

to production costs, they have also spurred innovation and technological development and

84 Source: Eurometaux, communication on letter to Eurometaux from the Consultants about comments Eurometaux made on

the Draft Final Report of this NFM competitiveness study.85

Source: Eurometaux, communication on letter to Eurometaux from the Consultants about comments Eurometaux made on

the Draft Final Report of this NFM competitiveness study.86

There are substantial differences in terms of European law, not only for environmental policies. More about the differences

in European law can be found at: http://ec.europa.eu/community_law/directives/directives_en.htm.87

Environmental policies are imposed at the EU level, and in the form of a Regulation, Directive, Commission Decision or a

Commission Recommendation. A Commission Decision is uniform in its interpretation and implementation for all EU27

Member States. A Directive serves as a guideline for Member States how they could implement some environmental

regulation on a national level, resulting in some flexibility in interpretation (and as such there can be differences in

legislation between Member States). An example is the Commission Recommendation on environmental inspections.

However, so far there have been several interpretations about this recommendation with the result that environmental

inspections are implemented and monitored in different ways and are not harmonised. Therefore, the implementation of a

possible Directive as a guideline regarding environmental inspections (or might even a Commission Decision) is under

discussion now at DG Environment.


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to some extent have contributed to the strong position of the EU NFM industry in terms

of energy efficiency, recycling rates and product innovation.

When considering the impact of environmental policies, it is important to distinguish

between the various sub-sectors and the various value chain activities in the NFMindustry. Environmental policies aimed at chemical and specific materials used in

refining activities have bigger costs implications for the upstream part of the value chain

than downstream parts. Examples include nickel and lead sub-sectors, but also for

aluminium and copper production.

In further downstream and higher value-added sub-sectors, such as precious metals, the

relative costs of compliance are usually lower. This is the case in activities and sub-

sectors that are closely linked to client industries, such as automotives, electronics and

telecom industries, and renewable energy industries. Environmental policies in these

segments seem to create opportunities for new applications and the development of new

technologies by NFM producers in cooperation with client industries. It is important for

producers in these segments that regulations are enforced properly and consistently

throughout the EU.

International comparison of environmental policies

EU environmental legislation is among the most far reaching and ambitious, which places

the EU NFM industry at a disadvantage. Lesser developed /emerging markets lag

substantially behind the EU in respect of their environmental policies, leading to lower

costs of compliance and enforcement of environmental policies.

However, in developed countries such as the United States, Canada, Japan and the EFTA

countries, environmental policies compare well with those of the EU and are applied

more uniformly and pragmatically, thereby reducing compliance costs. Most of thesecountries face similar issues relating to pollution and public awareness of environmental,

health and safety standards. The US Environmental Protection Agency (EPA), for

instance, writes environmental profiles per sector, including sector opportunities and

policy enforcement profiles.

The priorities attached to environmental policies differ substantially across the world.

They are embedded in national tax systems and enforced through different legislative

acts. This makes comparison difficult, even impossible, though sub-sectoral impact

assessments could be informative. This, however, is beyond the scope of this

competitiveness report.

A macro-comparison for environmental policies in developing countries like China, India

and Russia, versus environmental policies in the EU27, is interesting to make as they are

starting up their frameworks for national environmental policies:

In recent years China has been working to develop, implement and enforce a solid

environmental law framework through SEPA (Ministry of Environmental Protection).

The environmental legislation in this framework is less stringent than the those in the

EU: air pollution control and prevention is not included, whereas the EU industry

must comply with air pollution regulations and the IPPC/IED permitting framework;


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