Debate: Sustained price increase of raw and construction materials in Europe
Date: THURSDAY, 8 JULY 2021
Speaker: Mairead McGuinness
Language: EN

This pressure on prices of some industrial products is a global trend, and it affects the important world markets – Europe, the US and China. In some cases, prices have reached their highest level since 2008. The Commission is monitoring the current disruptions in supply chains. We are seeing shortages in the supply of metals, minerals and wood, which in turn is leading to price pressures.  The situation may well be temporary as it is mainly due to temporary imbalances between supply and demand factors in these specific sectors. On the supply side, the increase in prices of raw materials particularly affects industrial ecosystems that are largely dependent on primary inputs such as the construction sector. And here, the increase in the prices of imported inputs, such as steel and in particular wood products, is significant. The inflationary pressure is less severe for plastic products and is not significant for glass and concrete. The Commission is currently analysing the scope, the magnitude and the potential outlook of this phenomenon in close cooperation with construction industry stakeholders.  On the demand side, there are also global factors that are shaping price dynamics. The strong economic recovery in China and in the US, together with an unprecedented investment boom, adds pressure on aggregate demand for such products. EU policies – successfully driving demand for construction and renovation – also contribute to this phenomenon. Analyses indicate that the prices of raw materials are the main cause of recent price increases of industrial inputs. That has also been affecting the construction sector. As indicated in the updated EU strategy, the impact of the crisis on the single market showed how restrictions caused major disruptions to the free movement of people, goods, services and capital. These restrictions profoundly affect value chains and economic activity. The capacity of stakeholders in our industrial ecosystem to quickly start and scale-up production was seriously constrained, and this is why the Commission is particularly vigilant and active to ensure a good functioning of the single market. And we are monitoring closely measures taken by third countries that might fuel further price increases.  The updated EU industrial strategy and the underpinning analysis indicate strategic dependencies for certain inputs and products. However, these strategic dependencies do not explain the peaks of prices. This is down to the accumulated and increased demand due to the economic recovery. Across the EU, the improvement in the public health situation is seeing sectors of the economy reopen for business, and we know that Europe can exploit more efficiently the existing potential for some raw materials and construction materials and in some cases cover domestically a more significant amount of our own demand. We have a strong industrial base, and together with stepping up our efforts towards circularity, we can reduce our strategic dependencies and continue to grow.  Let me now give you an overview of some of the actions the Commission has taken. We adopted the EU COVID-19 recovery plan and the EU action plan on critical raw materials last year and updated the industrial strategy this May. These communications list several EU actions that will improve the EU’s open strategic autonomy and foster the transition towards a green and digital economy.  In order to develop resilient value chains for EU industrial ecosystems we have launched a number of industrial alliances, including for raw materials, batteries and hydrogen. The Commission will soon launch additional industrial alliances.  In order to address specific challenges and to identify actions enabling the twin digital and green transition we are developing, together with industry, social partners and other stakeholders, transition pathways for industrial ecosystems. Around EUR 300 million has been allocated for raw materials topics under our research and innovation programme Horizon Europe in 2021 and 2022, to improve sourcing of primary and secondary raw materials and boost circularity and resource efficiency in the single market.  We will also submit a proposal this year to review the rules on waste shipments. This and other measures from the 2020 circular economy action plan, as well as the forthcoming Construction Product Regulation revision, will also help to improve circularity. We will further explore international partnerships and cooperation to address strategic dependencies and diversify supply with sustainable and responsible sourcing from third countries, enabling undistorted trade and investment. We will also undertake a periodic review of strategic dependencies and monitor the associated risks.  Member States have also developed their national recovery and resilience plans to guide the more than EUR 672 billion of investments from the Recovery and Resilience Fund.  Supporting activities in relation to raw materials can be one of the possibilities for Member States to pursue the objective of strengthening economic and social resilience. The InvestEU programme can also support investment in raw materials, including through its sustainable infrastructure policy window.  Honourable members, I look forward to this debate.