Innovation calls for resources

March 2011

What raw materials will we be needing in the year 2030? And how much? A study examines the interplay between technical change, demand for raw materials and natural resource supply.

The rare earths are a hot topic right now – in high-tech manufacturing, on the world’s commodities markets and in media reports. The fact is that these seventeen elements – the so-called rare earth metals – are by no means as rare as their name suggests (see box). But without them the modern world would come to a standstill. Yttrium, samarium, neodymium and the like are key elements in everyday products and for tomorrow’s innovations. Acting something like a stand-in for other critical natural resources, public discussion is focusing on the alleged shortage of rare earths. And what we’re talking about here is nothing less than the future of our cutting-edge technologies.

Going beyond fleeting headlines and adopting a broader point of view, a study by the Fraunhofer Institute for Systems and Innovation Research (ISI) examined industrial use of new technologies in the future and the resultant impact on global demand for resources. Another investigation vector was to establish which resources are particularly critical for certain innovations. Drawing from about one hundred future technologies, thirty-two were selected and analyzed. Their relationships to twenty-two natural resources were then determined.

According to the study’s authors, tremors in the commodities markets are not caused by depleted supplies, as is often assumed. Instead, turbulences arise from imbalances between supply and demand. Up-and-coming markets like China are stimulating demand to an unexpected extent. The effect of technical innovations on global demand is apparently not always recognized. This can lead to misappraisals of the situation.

Anyone who wants to do business efficiently is highly reliant on in-depth information about the interplay between technical change and the ensuing demand for raw materials. An indicator of the demand triggered by technical change is useful. The study uses as its indicator the ratio between future demand for a resource and current worldwide production. This figure shows which multiple of today’s total production in a particular resource will be required in 2030. For gallium this indicator reaches a value of 6 while neodymium reaches 3.8.

This means that demand for these two resources – due solely to foreseeable technical advances – will be 6 and 3.8 times as great as today’s entire production output. And these figures do not yet include the demand for natural resources emanating from effects aside from the new technologies analyzed here. The conclusion drawn by the authors is that more efficient utilization of raw materials and redoubling recycling activity will be central tasks for the future.

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