EU plan to buy key commodities centrally is outdated, technology groups warn

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Commodity trading platforms have slammed EU proposals to centralize the purchase of natural gas, hydrogen and essential minerals as overly bureaucratic, which will make the bloc a trading competitor.

Major software vendors in the industry have warned that EU plans, which would require companies to build a new trading system and then transfer ownership to Brussels, would also undermine European efforts to promote local tech champions. They also warned that the plans were not suitable for the purpose for which the target commodities were traded.

The criticisms are the EU’s toughest efforts yet to aggregate demand for goods in hopes of lowering prices and kick-starting developing or localized markets, the way the bloc has successfully handled Covid-19 vaccines. Brussels has also turned to joint gas purchases after record price rises following Russia’s large-scale invasion of Ukraine.

But Enmacc and MetalsHub, two of the continent’s leading commodity procurement software providers, said the auction threatened to undermine the business model of the region’s technology groups.

The document, released in early June and valuing the project at €9 million, states that “the contractor will transfer the entire modular IT platform and its operation to the European Commission” after operating it for five years.

“The biggest problem that makes me suffocate is that my biggest competitor is the European Commission,” said Jens Hartmann, chief executive of Enmacc, a gas and green energy trading platform that has handled deals with 35 billions of euros last year. “Why should the EU operate a platform if European companies already operate similar infrastructure?”

He added: “We can provide technology that we have invested €20 million in, but we cannot hand over our intellectual property. As a risk-based company, we need to protect IP.”

A spokesman for the commission said “the intention is to have a contractor manage this platform”, adding that the executive body needed “specific expertise” and would work “in very close coordination with the contractor”.

The bloc hopes to emulate the use of a platform called Aggregate EU, run by software company Prisma, which sold 42 billion cubic meters of gas last year. The new IT platform will replace AggregateEU.

Maroš Šefčovič, the European commissioner responsible for AggregateEU, said in May that there was “very high political demand for this platform” and that it would form the “blueprint” for the joint purchase of other strategic commodities. EU officials said the commission could request to take over the platform even sooner.

But Frank Jackel, co-founder and managing director of MetalsHub, said his company 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 the leading private companies in the EU? We don’t have a large number of technology companies in Europe as global leaders,” he said. Policy makers were not qualified to build and operate commodity trading platforms, he continued.

A European auto executive said joint procurement could strengthen the supply chain for smaller suppliers, but warned the EU could use control over market infrastructure to introduce mandatory stockpiling or requirements to reduce reliance on China.

“If the infrastructure is built by the European Commission, then we don’t want European policy makers or governments to have too much power in terms of commodity market trading platforms,” ​​the executive said. “We don’t want to have mandatory stocks for the industry.”

The two trading software makers also found fault with the EU’s plans to jointly buy more commodities that have little in common.

Gas is a large and established global market, while hydrogen remains an emerging market traded exclusively on long-term contracts. And critical minerals like lithium, graphite and rare earths are highly specialized raw materials, manufactured to customer specifications, with illiquid and opaque markets.

The two groups have teamed up to bid for the tender and insist they are keen to help the EU meet its goods procurement targets.

But they urged the bloc to reconsider the proposal. “It doesn’t make sense,” Hartmann said. “They are traded differently.”