Volatility in commodity prices as well as market distortions due to protectionists measures threatens to increase inflation in a sector which is vital for EU’s economy and the development of innovative technologies. In order to tackle this problem, the European Commission has presented an integrated strategic vision to tackle challenges in Commodity markets and on Raw materials proposing actions to improve the regulation, functioning and transparency of financial and commodity markets.

Commission's Communication on raw materials proposes a series of measures, based on its 2008 Raw Materials Initiative to ensure a fair and sustainable supply of raw materials from global markets, to foster sustainable supply within the EU and to boost resource efficiency and to promote recycling. The European Union has done significant steps in this sense such as identifying critical raw materials, actions in the area of trade and development, guidelines that clarify how extraction in the EU can be compatible with Natura 2000 requirements, new research opportunities under the 7th Research Framework Programme and development of end-of-waste criteria.

Recent developments on commodity markets show that the prices of derivative and physical markets may be linked in multiple ways, as the price of commodity derivatives is influenced by the price of the underlying commodity. It is also clear that investors increasingly use commodity derivatives as part of their strategic investments. For that reason, financial market regulation is one important response to these developments.

The Communication also notes that further work is necessary to understand fully the interlink between physical and financial markets. The European Commission intends to continue working on this matter, in the framework of the G20-debate taking place at the global level.

Key elements for an integrated strategic approach to commodities and raw materials

• Improving the integrity, transparency and stability of commodity derivatives markets
• Undertaking additional research on developments in financial and physical commodities markets with the aim of identifying how the linkages work
• Regularly updating the list of 14 critical raw materials already identified by the European Commission
• Monitoring the development of access to critical raw materials with the view to identifying priority actions
• Strengthening the EU’s trade strategy in relation to raw materials and pursuing the "raw material diplomacy" to address raw materials priorities in bilateral and multilateral frameworks and dialogues
• Developing a bilateral co-operation with African countries in the area of raw materials, based on promoting governance, investment and geological knowledge and skills
• Working closely with Member States and other stakeholders to improve the regulatory framework for sustainable extraction within the EU
• Enhancing resource efficiency and promoting recycling, within the EU flagship initiative on a resource-efficient Europe, by tackling the waste levels due to sub-standard treatment inside or outside the EU and obstacles to the development of the recycling industries through for example the strengthening of the enforcement of the directive on waste from electrical and electronic equipment
• Further promoting research and innovation efforts along the entire value chain of raw materials, from extraction, processing, recycling and resource efficiency to substitution