As long ago as November 2008, the European Commission presented a new integrated strategy for raw materials, suggesting three pillars for the EU’s policy response to global resource scarcity: better and undistorted access to raw materials on world markets; improved conditions for raw materials extraction within Europe; and reducing the EU’s consumption of raw materials by increasing resource efficiency and recycling. Since then, an EU expert group has identified 14 raw materials seen as “critical” for EU high-tech and eco-industries and suggested that the European Union’s global diplomacy should be geared up to ensure that companies gain easier access to them in future. As to prices in all major commodity markets (energy, metals and minerals, agriculture and food), the Commission notes an increasing trend since the summer of 2009. In autumn 2010, the EU executive said it was planning measures to regulate commodity exchanges and curb speculation.
In February 2011, the European Commission presented an integrated strategic vision to tackle challenges in commodity markets and on raw materials. The Communication included measures to improve the transparency of financial and commodity markets. The European Commission also called for the swift implementation of the Raw Materials Initiative adopted in 2008.
In the last week of May, the EU Council issued a statement welcoming the EU Commission’s February 2011 Communication on commodity markets and raw materials, which set out proposals to improve the regulation, functioning and transparency of financial and commodity markets. The Council’s statement:
- notes the growing influence of financial actors in commodity markets, in particular the rise in financial investment flows into commodity derivative markets in recent years, including agricultural and oil markets;
- notes that the transparency of commodity derivatives markets needs to be improved without compromising the positive functioning of these markets, and stresses the need to ensure effective regulation and supervision of trading in commodity derivatives as well as an adequate regulatory and supervisory framework governing physical markets;
- encourages the Commission to come forward with proposals for better transparency and regulation on derivative commodity markets, within the framework of the revision of the Markets in Financial Instruments Directive (“MiFID”) and the Market Abuse Directive (“MAD”) and bearing in mind that the proposal for regulating over-the-counter (“OTC”) derivatives, central counterparties and trade repositories (i.e., EMIR) also has a bearing in this area;
- stresses the need to improve the quality and availability of data on physical markets and derivatives markets, in particular OTC, to extend position reporting, and to give sufficient powers and tools to the respective supervisors to ensure a better coverage of physical and commodity derivatives markets, notably OTC, whilst preserving market liquidity;
- emphasises the need for an effective regime to identify and prevent market abuse, in particular cross-market manipulation between the physical markets and the derivatives markets; and
- stresses the need to ensure that financial market participants are subject to adequate and proportionate regulation and supervision, especially when trading in commodity derivatives.
In the same week, European Commissioner Barnier announced that the Commission will propose powers to cap trading by big investors to control speculation in commodities. Speaking in the European Parliament, Commissioner Barnier said that the Commission wants to know who is doing what, when they are engaged in speculation.
The Commission noted, however, in its Communication that further work is necessary to understand fully the links between the physical and financial markets.
