Raw materials are becoming increasingly expensive

Rising material costs threaten manufacturing

Reliance on China as a sole raw materials supplier could put the UK manufacturing sector at risk, the EEF has warned.

In a recently published report, named Materials for Manufacturing: Safeguarding Supply, the manufacturers organisation urges the UK government to take action, following other European countries, to secure future supply of essential materials.

According to the report, about 40 per cent of manufacturers’ operational costs are material costs, with 75 per cent of EU manufacturers having seen material costs increase since 2000.

The report names reliance on a single supplier together with growing demand as the major risk factors.

China is the leading supplier of materials to the UK, producing 22 of 38 elements of strategic economic value. These are minerals and metals that are vital to British manufacturing.

Competitor nations, such as Germany and the USA, have already implemented sophisticated resource strategies seeking to minimise supply risks, enhance resource productivity and regulate waste for economic value. The UK Government, however, has so far responded weakly, the EEF says.

Although during the 20th century resources became progressively cheaper, the manufacturing industry is now reaching a turning point. Data suggests that the 100-year decline in resource prices has been reversed in the last decade as demand for commodities has surged.

In 2010, the EU deemed 14 materials to have supply risks. In only four years, the number has increased to 20 materials and includes those used in consumer electronics and telecoms products, engineering/construction, agriculture, aerospace and steel and aluminium production.

“Resource security is dynamic and complex. It requires a flexible response working in close cooperation with industry and other stakeholders,” said Susanne Baker, Senior Policy Advisor at EEF. “But key to this must be a joined-up, thought-through approach across relevant policy areas.

EEF suggests establishing a new Office of Resource Management to act as a central hub of expertise in the sector. The office would regularly assess material supply risks and vulnerabilities and provide incentives for resources efficiency to help overcome market failures.

The measures to be taken include regulating waste so that more economic value is extracted from what is being discarded.

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