In this report, Growth Analysis identifies future needs for innovation-critical metals and minerals. In addition, we provide information regarding what might be required in order for the entire production chain – from extraction to finished product – to be located in Sweden.
The availability of innovation-critical metals and minerals is essential for the functioning of modern energy, environmental, and technological innovations, and these metals and minerals are becoming increasingly important. They are found in all electronics, solar cells, wind turbines, and batteries – essentially, all technologies that are key to the transition to a more environmentally sustainable society. That said, their extraction and refinement can give rise to significant environmental problems. Several innovation-critical metals and minerals are currently being extracted in just a few countries; for example, roughly 85 per cent of all rare earth elements come from China.
This report looks at two issues that the Swedish government commissioned Growth Analysis to analyse. The first was to outline future needs for innovation-critical metals and minerals. The second was to look at what the Swedish state can do to improve the conditions for the development of an entire Swedish production chain for innovation-critical metals and minerals, from extraction to finished product.
Within this project, the term “environmental and technological innovations” has been defined as innovations that have the aim of reducing environmental impact by way of increased resource efficiency, the use of renewable energy, and recycling of raw materials. Using this definition, five technologies have been selected that are of particular importance – permanent magnets, batteries, special alloys, fuel cells, and solar cells. Permanent magnets have a special status in this context because they are a fundamental technology in an electrified society. This also implies that modern technology is particularly dependent on the availability of rare earth elements. Consequently, a society with electrified vehicles powered by renewable electricity is impossibility without access to rare earth elements.
Several innovation-critical metals and minerals can be extracted in Sweden, including rare earth elements and graphite. In addition, there is potential for the extraction of lithium, nickel, and tungsten, and to certain extent cobalt. This means that Sweden has an interesting geological potential with regard to the rapidly growing demand for lithium-ion batteries, permanent magnets for electronics, and many special alloys within the steel industry. This geological potential exists not only in new mines, but also in mining waste from old or existing mines. The physical extraction volume of several of the metals and minerals needed to produce fuel cells and solar cells is, however, not especially high in Sweden. In addition, even if extracting these as part of a recycling programme of end products were technically possible, it would not be profitable because there are only very small quantities of these metals and minerals contained in these products, which are developing rapidly in terms of both their design and choice of materials.
In our analysis, we have identified comparative advantages within three value chains – rare earth elements, lithium-ion batteries, and special alloys containing tungsten. Because Sweden’s geological potential is good or very good for all three of these value chains, measures that facilitate mining in general are key to their development.
In the case of rare earth elements and special alloys containing tungsten, the assessment is that Sweden should not introduce measures beyond those that facilitate mining in general. Rather, rare earth elements should be seen from a European perspective, where Swedish companies can find and develop a position within a European value chain. We find, however, that even a European value chain could prove difficult to establish because it would likely struggle to compete commercially with existing Chinese clusters. There is a significant market risk, and given that security of supply is a necessity, the state would need to implement measures to mitigate this risk.
The state could bolster the development of a value chain for lithium-ion batteries, and there are possible spillover effects in the development of this value chain. Swedish battery manufacturing would create an incentive for the extraction of graphite, lithium, and cobalt, in addition to having the potential of being integrated vertically with battery manufacturing and consequently lead to potentially lower production costs.
General government or state measures to improve the attractiveness of the mining industry are vital for any value chains that might be developed around the extraction of innovation-critical metals and minerals. These are measures whose primary purpose is to reduce the institutional risk that is deemed to have increased in Sweden in recent years. This includes inertia in the form of political conflicts between economic, social and environmental objectives, as well as lengthy decision-making processes with regard to spatial planning and the granting of mining concessions. The tendency has been that the state and its authorities have chosen a direction that minimises rather than manages risk. This results in decision makers seeking ever more data and information to create the sense of having a complete assessment of the future impact of a mine. This approach results in protracted and unpredictable permitting procedures that hamper innovation and entrepreneurship.
Compared with most other countries, Sweden’s mining industry and electricity mix is environmentally friendly. Consequently, there is the potential for a Swedish competitive advantage that is not currently utilised to any great extent. The state can implement initiatives to improve the conditions for such a development. In order to push development in this direction, an analysis is needed to provide an understanding of the ability to create sustainable value chains by way of the labelling of metals and minerals. This involves analysing how competitiveness is affected as well as how the state can stimulate demand for products containing sustainably produced metals and minerals.
Interest in the manufacture of lithium-ion batteries might serve as a springboard for the development of a cluster that also includes the extraction, refinement, enrichment, and recycling of lithium, graphite, and cobalt. Such a development should take place on commercial grounds because this would create the conditions for the long-term development of such a cluster. Should this development be initiated by the state, it risks disappearing as soon as the state ceases to support its development.
For a small, open economy such as Sweden’s, the starting point should be identifying where Sweden might have comparative advantages and how these can be developed. Several European countries, including Sweden, are at the forefront of the development of consumer products containing rare earth elements.
Rare earth elements might be extracted in Sweden, but the technical and industrial expertise needed for some aspects of their refinement and enrichment is lacking or in need of development. However, this expertise does exist in countries such as Estonia and France where rare earth elements are imported before being refined domestically. In order to increase the attractiveness of Swedish extraction of innovation-critical metals and minerals, the state could initiate additional international collaborations and engage in international initiatives.
Innovation-critical metals & minerals from extraction to final product – how can the state support their development?