With the German federal government’s blessing, conglomerates are forming the Alliance for Commodity Hedging to secure supplies of critical raw materials.
RENO, NV -
Germany’s BDI Federation of German Industries is helping at least 12 major German conglomerates form an alliance to secure raw materials, such as base and rare earth metals, to overcome fears of supply shortages.
In an interview with Bloomberg, BDI spokesman Alexander Mihm said the Allianz zur Rohstoffsicherung (Alliance for Commodity Hedging) will be founded at the beginning of the new year. Among the companies who will join the alliance are BASF SE, the world’s largest chemical maker, steel company Thyssen Krupp AG, and specialty chemical company Evonik.
Trade restrictions by major commodity exporters such as China and rapidly rising commodity prices apparently prompted these companies to form the alliance, based on a concept created by the Boston Consulting Group. The goal is to establish a global, for-profit resource company that allows the German industry to have independent access to critical materials, such as copper and rare earths.
Access to REE deposits is crucial to the development of high technology industries in Germany, including the renewable energy sector, which is viewed as a driving force of the German economy.
The Dusseldorf-based business newspaper Handelsblatt reported that the alliance has the support of Germany’s federal government including the Chancellor’s Office, Ministry of Economy, Foreign Office, and Department of International Development.
In October, German Chancellor Angela Merkel signed an intergovernmental agreement on resources, industry and technology partnership with Mongolian Prime Minister Sukhbaataryn Batbold. The signing of the resource partnership was a consequence of the German government’s strategy to support German companies in getting access to iron, silicon and rare earth metals.
German companies want access to Mongolia’s deposits of coal and rare earths in exchange for providing the machines to extract resources. However, the German government has not yet succeeded in concluding a contract for the mining of rare earths in Mongolia, due to intense competition for REEs from Chinese and Russian companies.
A similar alliance with the government of Kazakhstan is also being sought by the German federal government.
However, the member companies of Alliance for Commodity Hedging have made it clear to the German government that they want political, not financial support, Handelsblatt said.
Mihm told Bloomberg that the alliance will cost participants several hundred thousand Euros, and once project begin, other contributions will be required.