Novel Indicators for the Quantification of Resilience in Critical Material Supply Chains, with a 2010 Rare Earth Crisis Case Study

Abstract

We introduce several new resilience metrics for quantifying the resilience of critical material supply chains to disruptions and validate these metrics using the 2010 rare earth element (REE) crisis as a case study. Our method is a novel application of Event Sequence Analysis, supplemented with interviews of actors across the entire supply chain. We discuss resilience mechanisms in quantitative terms–time lags, response speeds, and maximum magnitudes–and in light of cultural differences between Japanese and European corporate practice. This quantification is crucial if resilience is ever to be taken into account in criticality assessments and a step toward determining supply and demand elasticities in the REE supply chain. We find that the REE system showed resilience mainly through substitution and increased non-Chinese primary production, with a distinct role for stockpiling. Overall, annual substitution rates reached 10% of total demand. Non-Chinese primary production ramped up at a speed of 4% of total market volume per year. The compound effect of these mechanisms was that recovery from the 2010 disruption took two years. The supply disruption did not nudge a system toward an appreciable degree of recycling. This finding has important implications for the circular economy concept, indicating that quite a long period of sustained material constraints will be necessary for a production-consumption system to naturally evolve toward a circular configuration.

Resilience in the tantalum supply chain

“…It is estimated that some industry inventories are sufficient to last for two years (Stratton and Henderson, 2012). This is in line with findings from Sprecher et al (2017) for REE stockpiles held by producers of intermediate neodymium-magnet products.…”

“…When faced with shortages, the industry rapidly substituted alternative capacitor materials for tantalum, often within one year. This compared to the 2-year substitution time-lag found by Sprecher et al (2017) for neodymium magnets.…”

“…The supply of smuggled tantalum from conflict regions has proven to be remarkably resilient in the face of legislative action such as the Dodd-Frank act. As was previously noted by Sprecher et al (2017) regarding the illegal trade of rare earth elements, resilience is not necessarily a positive attribute, and has long term implications for the sustainability of the overall tantalum supply chain.…”

“…The metal therefore makes an interesting case study on the resilience of metals supply chains, especially in light of a previous study on the resilience of the supply chain of rare earth elements (REEs) that focused on neodymium magnets (Sprecher et al, 2015(Sprecher et al, , 2017. One of the main findings of that study was that disruptions caused by export constraints put in place by the main producer of REEs (China) gave rise to significant illegal mining and exports that eventually contributed up to 40 percent of total world production.…”

Rare Earths and the Balance Problem: How to Deal with Changing Markets?

“…Binnemans and coworkers have discussed the Balance Problem in depth and different options for its mitigation have been proposed, i.e., the diversification of REE resources, recycling, substitution, reduced use, and new high-volume applications for REEs that are produced in excess [11,12]. Temporary stockpiling could be a partial answer to short-term fluctuations in the demand for certain REEs [13]. The importance of the Balance Problem has also been highlighted in the final report of the European Rare Earths Competency Network (ERECON) [1].…”