Review of the Future
Resource Risks Faced by
UK Business and an
Assessment of Future
Viability
AEA Technology plc
A research report completed for the Department for Environment, Food
and Rural Affairs
Executive Summary
December 2010
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Executive Summary
Over recent years the issue of resource scarcity has risen to the fore as a key challenge
facing businesses and governments alike. Reports suggest that if the availability of certain
resources is affected by restricted access or price volatility, the impact for business could be
severe.
However, as with any risk, effective forecasting and management can mitigate the problem
for businesses and can even open up new opportunities for innovation and future success.
This report seeks to identify the resources essential to the UK most at risk of future scarcity
and how businesses need to negotiate these difficulties in order to ensure their operations
are sustainable and profitable for years to come.
The resources concerned include:
 biotic resources meaning those related to or produced by living organisms including
timber and fish, and
 non-biotic (non-living) resources such as minerals and metals which are needed to
build high technology and many other products.
Resources at Risk
The literature reviewed as part of this work identified that many resources are potentially at
risk. Those listed below, identified from the literature and from stakeholder comment, are
considered particularly important. They were identified from a much longer list of 25+
resources noted in the literature. Key messages emerging from the work are equally
applicable to resources other than those outlined here and therefore apply to other business
sectors. Therefore sectors other than those listed below should also be aware of these
issues as this study only represents an assessment at a snap shot in time and the
availability of other resources will be affected by factors such as technology change and
government policy.
From the perspective of supply and demand risks, key resources and the sectors using them
are:
 Aggregates – construction and civil engineering
 Fish – food and drink
 Indium – electronics, IT and renewable energy
 Lithium – automotive and battery
 Phosphorus – agriculture
 Rare earth elements – automotive, chemical, engineering, renewable energy
Aggregates (land and marine)
Limited availability of aggregate supplies in the short, medium and long term, coupled with
increasing costs due to transport issues and restricted access to domestic reserves, mean
that there is a risk to UK businesses, particularly aggregate production and supply
companies. The issues are connected with aggregates availability being impacted by
planning restrictions whereby a number of aggregate reserves are either in or in close
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proximity to National Parks and similar areas. Impacts will also be experienced by
construction companies. The availability of indigenous supplies is thought to be 40 years for
crushed rock and 10 years for land sand and gravel.1
Fish
While major fish stocks are reported to be overexploited and depleted on a global scale,
supply to UK businesses are predominantly thought to be from well managed sources and of
sufficient supply. The UK remains one of the top aquaculture producing countries in the EU.
However, growing concerns over food security, feed and energy cost increases may
threaten the economic viability of such operations. The UK is becoming increasingly reliant
on imports. Import volumes have increased by 46% from 1998 to 2008 with 2008 imports
valued at £2.2 billion. In 2008 the UK exported £1.0 billion in seafood products mainly to
Continental Europe2.
Indium
Strong growth in indium use from the electronics and solar energy sector is anticipated. The
graph3 below illustrates the consumption trend to 2020.
Primary indium production, as a by product of zinc production, may decrease as a result of
market zinc surplus. This may also mean that indium producers are unable to respond
quickly to increases in demand. The impact of restrictions on exports by major indium
suppliers could also result in market uncertainty. The most critical activity to maintain
balance between supply and demand is the ability of countries to recover indium from
electrical components and scrap.
Lithium
Supplies of lithium are not in immediate short supply. However, by 2020 worldwide demand
may exceed supply as a result in the expansion of the hybrid and electric vehicle markets,
1
Environmental concept limits, 2007, Defra.
2
http://www.seafish.org/plate/facts.asp
3
Critical Raw Materials for the EU, July 2010, Annex V b
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unless new investors and suppliers enter the marketplace4. Geopolitical influence on lithium
supply may become a key issue, with a need to successfully develop the capability to extract
resources from reserves in key supplier countries. Finally, lithium recycling is minimal but is
currently growing as a result of the Batteries Directive. The graph below5 shows the
expected growth in EU lithium consumption by 2020.
Phosphorus
Phosphate rock reserves are being rapidly used up with some experts suggesting we are
approaching ‘peak phosphorus’ in 2030. Phosphate prices have shown steep price
increases in recent years, as illustrated in the graph below, although the current price has
dropped back to mid-2007 levels.
4
5
Madison Avenue Research Group, 2009. Available at www.madisonaveresearcg.com/lithiummkt09.htm
(Accessed on 27 April 2010).
Critical Raw Materials for the EU, July 2010
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Price rises will impact UK farmers and agriculture in general as the cost of fertilizer rises.
Other sectors may be impacted such as garden centres and fertilizer wholesalers. As costs
increase, innovations are likely to become more economically viable. Consequently, there
may be some uptake of domestic production of organic phosphorus fertilisers using waste
materials. Another impact and risk to UK business is through geopolitical influences on
phosphorus, for example with China recently imposing a 135% export tariff on phosphate
rock, which will have an impact on global mass balance levels as well as impacts on prices.
Rare Earth Elements
Demand for and supply of REE is expected to increase. In the medium and long term,
China’s domination of REE supply, currently 97%+, is likely to be eroded by the
development of mining operations outside China. Despite the development of new global
production, long term shortages of certain REE may persist as supply lags behind demand.
As a consequence it is likely that the UK will face long term supply availability issues, with
significant implications for the development of aspects of a low carbon economy including
key applications such as electric vehicles and wind turbines where REE materials are used
for high efficiency, permanent magnets. The graph below shows the anticipated world
supply and demand for REE through to 20146.
Who Is Affected by Resource Risks?
During this study, stakeholders from various industries were invited to give their views on
resource risk and how they anticipate their businesses will be affected. Representatives from
industries as diverse as construction, food and drink, agriculture, automotive, chemical,
engineering, electronics and IT and cosmetics contributed their views to the report. It was
noted that further evidence should also be gathered at a later date from the SME sector to
6
http://avalonraremetals.com/_resources/IL_010.01_Magnetics.pdf,
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gain a broader picture of how different businesses understand and are addressing the same
challenges.
The Context
The report has shown that the current economic downturn will reduce demand and supply of
a number of resources in the short term. However in the medium (5 – 20 years) to long term
(20+ years) the overall trend is one of increasing resource demand. This is due to population
growth, increasing global economic development and the drive towards a low carbon
economy. It is against this background that UK businesses need to plan for the future. This
will mean considering how to secure supplies, reduce use or reliance on particular resources
or look at potential alternatives.
Resource reserves such as aggregates, metals and minerals are finite. Estimates of the
exhaustion timeframe can vary considerably even for the same resource and can be
anything from a decade to 50+ years. However, exhaustion is not the most immediate risk.
The more pressing challenge that needs to be addressed is how to ensure access to
resources is maintained.
These are issues that many businesses need to consider. Competitors are most certainly
considering the potential impacts on their business, with the problem being exacerbated by
competition between different sectors for the same resource. The UK is also by no means
alone in identifying the issues; other countries are acting too.
How These Issues Could Impact Your Business
Non-biotic resources (e.g. metals & minerals)
The questions and issues that businesses should be aware of include:

Is resource supply domestic or imported? Domestic supply offers greater security, while
imported resources may be at risk due to geo-political issues, or protectionist policies
from key supplying countries.

Regulatory and Government Policy may have resource availability implications – they
may impact on supply or increase demand for particular resources.

Businesses need to be aware that demand for resources is global and not confined to
the UK. There will be increased competition for resources and therefore more volatility in
terms of price.

In a number of cases, alternatives are not currently available for resources that are
important to UK businesses, for example low carbon technologies such as electric
vehicles, or where they do exist may not offer the same level of performance.

Businesses will need to identify alternative sources domestically and/or internationally,
while also bearing in mind issues around the time lag of developing a new mine, for
example.

Businesses should consider alternative approaches. The funds that would otherwise be
spent in exploration and extraction of new reserves could be used instead to invest in
process or production innovation and /or recycling of materials.
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
Recycling and the potential recovery of resources from waste products will become
increasingly important for some resources. Recovery should be looked upon as an
alternative source with care being taken to ensure appropriate treatment processes are
used.
Biotic resources
For biotic resources the position is different. These resources are at least renewable if
provided with effective stock management or crop growth.
For businesses, the key issues are as follows:
 There is a clear need for effective sustainable resource management to ensure
consistency of supply.

NGO and consumer pressures and concerns need to be addressed in order to avoid
reputational risks.

Demonstrating the use of sustainable resources will be vital in ensuring access to
markets in the future and to demonstrate the level of transparency required by others.
Opportunities for Business
The report highlights the ways in which resource risks can present opportunities and benefits
for business.
Of course the right economic conditions will need to be in place before businesses may be
willing to investigate specific opportunities. There needs to be certainty and stability in the
market to attract long term investment, the viability of markets needs to be assessed and
other risks such as the use of alternatives understood.
However, potential benefits to business may include cost savings, security of resource
supplies and the ability to react to changes in the market situation for particular resources.
Some of the main opportunities for businesses include:





Development of alternative markets, or diversification of existing markets
Increased recycling and recovery of materials, including the development of appropriate
collection infrastructure, treatment processes and markets for the recovered materials
Development of new raw material sources – mining of previously un-exploited deposits
Use of alternatives, and research into other possibilities where no alternatives currently
exist – this may include collaboration with other sectors, universities or Government.
Process or product innovation – the development of new techniques or innovative
processes and potential ecodesign opportunities to reduce resource use.
A series of case studies have been developed to highlight examples of opportunities taken in
order to address resource risks and the benefits gained by business
Key Points in Conclusion
This work has brought together information, views and opinions that were previously
separate.
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In doing so, it has identified that pursuing some further activities is appropriate:
1. While the work suggests that larger organisations and companies are aware of the
resource risks considered here, the awareness of SMEs has not been gauged.
Engaging with SMEs and raising their awareness is important as a lack of information
could leave them unprepared for resource supply issues, potentially affecting the
efficiency of the whole supply chain to which they belong, as well as their own
profitability.
2. Improving the flow of information on resource risks will ensure that the issue remains at
the forefront of people’s minds when business decisions and policy are formulated.
Doing so will ensure business is aware of potential opportunities as well as risks – thus
maintaining if not creating jobs. Equally for government, being aware of the resource
implications of the policy options it is considering will help guide practical
implementation. Awareness will also mean that government is better placed to support
UK business, for example, in its discussions with EU member states and the
Commission.
3. Businesses need to understand their supply chains. Even if they themselves are not
directly at risk, the situation could be very different for others that they rely upon.
4. A number of the resources discussed come into the UK economy in the form of finished
products (rare earths in hard disk drives being an example). In the future, this fraction
could increase. Therefore, there are real opportunities for business in the form of
product reuse, remanufacture and recycling. All of these processes would help prevent
loss of rare and valuable materials from the economy.
5. Some sector stakeholders, for example those involved with metals and phosphorus,
would welcome further interaction with government at a national or indeed European
level. They see that such interaction being beneficial to all parties as a result of the
understanding that would ensue.
6. There is a need to maintain a watchful eye on developments. A report such as this
provides an assessment at a point in time. However, the reality is that things change
and in time other resources may become important. For example, a step change in
technology could well alleviate the risk on a particular resource and/or place pressure on
the availability of another.
7. There are gaps and uncertainties in the literature sources used for this report. For
example, for any one finite resource, predictions regarding its reserve lifetime can vary
markedly from a few years to tens of years. Securing better sources of information on
reserves would help not only business but also government whose policy may depend
on the resource’s availability.
8. The above points suggest government and UK business would benefit from the
development of a shared evidence base on resource issues. This is especially true for
renewable (biotic) resources where the gaps in our knowledge were significant. Unless
there is an increase in knowledge about the sustainability of extraction operations for
renewable resources it would be difficult to assess the risks associated with the use of
such resources. The development of a shared database would also help to develop
business and government understanding of resource risks in the future. Doing so would
facilitate partnership working between the two parties to find solutions to the benefit of
both.
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