Commodity trading platforms have criticised (European Union) EU proposals to centralise the purchase of natural gas, hydrogen and critical minerals for being bureaucratic over-reach that will make the bloc a commercial competitor.
Leading industry software suppliers have warned that the EU’s plans, which would require the companies to build a new trading system and then transfer ownership to Brussels, would also undermine European efforts to foster local tech champions. They also warned that the plans were not fit for purpose for how the target commodities were traded.
The criticisms are the starkest yet of EU efforts to aggregate demand for commodities in the hope of pushing prices down and jump-starting nascent or localised markets, in the way the bloc managed successfully for Covid-19 vaccines. Brussels also turned to joint purchases of gas after record price spikes following Russia’s full-scale invasion of Ukraine.
But Enmacc and MetalsHub, two of the continent’s leading software providers for commodities procurement, said the tender threatened to undercut the business model of tech groups in the region.
The document, released in early June and putting a value of €9 million on the project, states that “the contractor will transfer the entirety of the modular IT platform and its operation to the European Commission” after operating it for five years.
“The biggest problem that makes me choke is that my biggest competitor is the European Commission,” said Jens Hartmann, chief executive of Enmacc, a gas and green energy trading platform that handled €35bn of trades last year. “Why should the EU operate a platform if European companies already operate similar infrastructure?”
He added: “We can offer technology that we have invested €20mn in but we cannot hand over our intellectual property. As a venture-based company, we need to protect the IP.”
A commission spokesperson said that “the intention is that we have a contractor that manages this platform”, adding that the executive body needed “specific expertise” and would work “in very close co-ordination with the contractor”.
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The bloc is hoping to emulate its use of a platform called AggregateEU, run by software company Prisma, which sold 42 billion cubic metres of gas last year. The new IT platform will replace AggregateEU.
Maroš Šefčovič, the European commissioner in charge of AggregateEU, said in May that there was “very high political demand for this platform” and that it would form the “blueprint” for joint buying of other strategic commodities. EU officials have said the commission could request to take over the running of the platform even earlier.
But Frank Jackel, co-founder and managing director of MetalsHub, said his company had told the bloc that “we are not happy for the EU to operate” their software platform.
“Does the European Commission want to become a competitor to leading private companies in the EU? We don’t have a huge amount of tech companies in Europe as global leaders,” he said. Policymakers were not qualified to build and operate commodity trading platforms, he went on.
One European automotive executive said joint purchasing could strengthen the supply chain for smaller suppliers but warned that the EU might use its control over market infrastructure to introduce mandatory stockpiling or requirements to reduce dependency on China.
“If the infrastructure is built by the European Commission, then we don’t want policymakers or European governments to have too much force about raw material market exchange trading platforms,” the executive said. “We don’t want to have mandatory stockpiling for industry.”
The two trading software producers also found fault with the EU plans to jointly purchase multiple commodities that have little in common.
Gas is a large and established global market, while hydrogen remains a nascent market traded exclusively on long-term contracts. And critical minerals such as lithium, graphite and rare earths are highly specialised raw materials made to customer specifications with illiquid, opaque markets.
The two groups have teamed up to bid for the tender and insist they are keen to help the EU achieve its aims on commodities purchases.
But they urged the bloc to reconsider the proposal. “It makes no sense,” said Hartmann. “They are traded differently.” – Copyright The Financial Times Limited 2024
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