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Agent-based modeling of supply disruptions in the global rare earths market
Abstract and Figures
Several independent assessments have identified rare earth elements (REEs) as critical materials, notably neodymium (Nd), praseodymium (Pr), and dysprosium (Dy) used in permanent magnets. Factors affecting their criticality include expected growth in demand arising from their unique performance-enhancing properties in consumer, energy, and military applications and the supply risk associated with China's dominance in their production. We demonstrate the use of Argonne's Global Critical Materials (GCMat) agent-based model to explore the possible consequences to REE market dynamics of different types of regional supply disruptions including a temporary loss of production, shutdown of capacity, and diversion of supply. Results suggest that supply disruptions may foster earlier and more REE mine starts outside of China, although some of these mines may not be able to sustain operations post disruption. Further, price and associated market responses such as production, capacity, and demand tended to extend beyond the disruption period. Such market impacts in the magnet supply chain could affect the costs and availability of a number of emerging clean energy technology applications such as electric vehicles and wind turbines. In the future, GCMat could be used to evaluate the effectiveness of mitigation strategies — including recycling, conservation, product substitution, and diversification of supplies — on reducing the severity of disruptions in REE markets.
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... Figure 1 shows a select few of these cleaner energy critical materials. Rare earth elements (REE) stand out prominently on this list owing to a 100% import reliance, primarily on China, where the vast majority of the world's REE reserves and refining facilities are concentrated (Riddle et al. 2021). Despite its vast REE mineral resources, the U.S. has limited operational refining capacity, leading to dependency of U.S. manufacturers on foreign supplies. ...
Critical materials such as rare earths underpin technologies needed for a decarbonized global economy. Recycling can mitigate the supply risks created by increasing demand and net import dependence, and enable a circular economy for critical materials. In this study, we analyze the feasibility and life cycle impacts of recovering critical materials from spent Nickel Metal Hydride batteries from hybrid electric vehicles in the U.S., accounting for stocks, battery scrappage, and end-of-life reverse logistics, given uncertain future availability scenarios. Our results show that the total collection and recycling costs depend strongly on future battery availability, with marginal costs exceeding marginal revenues when the availability of spent batteries declines. We quantify the potential of recycling to reduce primary imports, as well as the accompanying climate change and resource impacts. We explore the underlying reverse logistics infrastructure required for battery recycling, and evaluate strategies for reducing associated capital investment risk.
... safety stock, which is a coping strategy with SCDs as Bueno-Solano and Cedillo-Campos (2014) reported earlier that disruptions due to terrorist attacks can lead to a 600% increase in inventory levels. Riddle et al. (2020) also confirm that SCDs lead to capacity expansion decisions by firms that are not sustainable in the long-run. Hence, we suggest manufacturing firms to stress their supply chain resilience strategies, which are often conflicting with lean supply chain strategies. ...
Manufacturing firms that continued production activities during the COVID-19 have been taking necessary measures to cope with the risks imposed by the pandemic. This study assesses the measures implemented by the Ready-Made Garments (RMG) sector in Bangladesh. With the increase in COVID-19 cases in Bangladesh, following government order, along with firms in other manufacturing sectors, the RMG firms had to shut-down their production between March 26 and April 25, 2020. Soon after the factories reopened, they had to take necessary actions to ensure employee safety, supply of raw materials, and purchase orders from buyers. Using a semi-structured interview approach, we identify 16 measures that have been implemented in the RMG sector in Bangladesh for the employees, suppliers and buyers. Then, we assess the degree of implementation of these measures using the Bayesian Best-Worst method. We find that providing healthcare safety, bringing previously outsourced activities in-house, and ensuring smooth delivery of existing orders were the three most implemented measures for employees, suppliers and buyers, respectively. On a higher level, the RMG industry professionals prioritised buyer-related measures the most, followed by employee and supplier-related. The analysed measures provide a blueprint for supply chain risk management during future waves of COVID-19 transmission and for other potential large-scale natural disasters.
Estimating the material flows of rare earth elements (REEs) is essential to understanding which industries are most vulnerable to potential REE supply disruptions which, in turn, may inform policy recommendations aimed at reducing the supply risk. However, the REEs are a group of mineral commodities characterized by highly uncertain estimates of supply and demand due to the REE market's complexity, opacity, and small size. In this study, a streamlined methodology was applied to map mineral commodity first‐use to final‐use applications and to estimate total requirements at the national level based on available industrial data for final‐use finished goods. This analysis examines REEs both as a group and individually, showing that total US requirements are between 15% and 16.5% of world requirements for the year 2015, the latest year with the most complete information available. The findings shed light on US industrial capabilities by revealing the discrepancy between the types of REEs that go into US raw material consumption and those that are contained in embedded consumption. For instance, given the United States’ large oil refining industry, US raw material consumption of lanthanum is quite high. In contrast, US raw material consumption of neodymium is relatively low, whereas embedded demand is comparatively high. This reflects the lack of industrial capacity to process REE concentrates into magnet material combined with the US's high imports of products that contain rare earth permanent magnets.
Los concentrados de óxidos de “tierras raras” son hoy considerados críticos para la industria tecnológica. Su extracción y procesamiento están concentrados en China, Australia y Estados Unidos y su cotización comercial va en ascenso. Chile posee recursos inexplotados de tierras raras y relaves mineros que las contienen, sin procesar. Este trabajo indaga si el marco normativo minero actual de Chile abarca la minería de tierras raras y su procesamiento local; y si la respuesta fuere negativa, qué incentivos podrían -entonces- impulsar tal actividad de forma económicamente eficiente y medioambientalmente sustentable. Metodológicamente, la investigación examina -primero- las particularidades de las tierras raras; para luego contrastarlas con la regulación minera tradicional chilena y comparada; y, finalmente, proponer estímulos jurídico-económicos que posibiliten la minería de tierras raras y aporten a su cadena de valor mediante el procesamiento local. El trabajo sostiene la necesidad de abordar constitucionalmente mejor el dominio de las tierras raras; y que el marco jurídico vigente de sustancias minerales concesibles no acusa sus particularidades; postula, además, que el régimen apropiado de concesiones mineras de estos metales debe ponderar su valoración estratégica y económica, incluyendo el factor ambiental. Más aún, sostiene que -para el desarrollo y gestión de proyectos de exploración, explotación, beneficio y procesamiento local de tierras raras- es fundamental impulsar la investigación industrial estratégica y la formación de capital humano, diseñar esquemas de financiamiento (capital de riesgo, subsidios, fondos de reserva, tributación) y privilegiar formas público-privadas de asociación. La investigación es relevante porque impulsa un marco regulatorio que estimule el desarrollo de la minería de tierras raras, capaz de otorgar a Chile una oportunidad real de contemporizar su minería, diversificándola con la explotación de productos estratégicos de creciente demanda global; e introduciendo tecnologías eficientes que recuperen valor del procesamiento de desechos, reduciendo los pasivos ambientales de la minería.
Trade tensions, resource nationalism, and various other factors are increasing concerns regarding the supply reliability of nonfuel mineral commodities. This is especially the case for commodities required for new and emerging technologies ranging from electric vehicles to wind turbines. In this analysis, we use a conventional risk-modeling framework to develop and apply a new methodology for assessing the supply risk to the U.S. manufacturing sector. Specifically, supply risk is defined as the confluence of three factors: the likelihood of a foreign supply disruption, the dependency of U.S. manufacturers on foreign supplies, and the ability of U.S. manufacturers to withstand a supply disruption. The methodology is applied to 52 commodities for the decade spanning 2007–2016. The results indicate that a subset of 23 commodities, including cobalt, niobium, rare earth elements, and tungsten, pose the greatest supply risk. This supply risk is dynamic, shifting with changes in global market conditions.
Through the development and usage of an agent‐based model, this article investigates firms' adaptive strategies against disruptions in a supply chain network. Viewing supply chain networks as complex adaptive systems, we first construct and analyze a real‐world supply chain network among 2,971 firms spanning 90 industry sectors. We then develop an agent‐based simulation to show how the model of firms' adaptive behaviors can leverage competition relationships within a supply chain network. The simulation also models how disruptions propagate in the supply chain network through cascading failures. With the simulation, we seek to understand if a firm's adaptive behaviors can reduce the impact of disruptions in supply chain networks. Therefore, we propose, evaluate, and analyze two types of adaptive strategies a firm can leverage to reduce the negative effects of supply chain network disruptions. First, we deploy in our model a reactive strategy, which restructures the network in response to a disruption event among first‐tier suppliers. Next, we develop and propose proactive strategies, which are used when a distant disruption is observed but has not yet hit the focal firm. We discuss the implications related to how and when firms can improve their resilience against supply disruptions by leveraging adaptive strategies.
Wind power is often posed as a greenhouse gas emission mitigation option, yet from a global perspective, the constrained supplies of rare-earth metals required for large-scale offshore wind turbines seem increasingly likely to provide limits to offshore wind power and other rare-earth-metal applications in the coming years. A 2015 US Department of Energy study maps an ambitious roadmap for offshore wind power to be capable of meeting substantial US electric-generating capacity by 2050. Our study addresses the neodymium material requirements that would be needed. We find that regional differences in deployment schedules will result in complex patterns of new capacity additions occurring concomitantly with turbine retirements and replacement needs. These demands would total over 15.5 Gg (15.5 kt) of neodymium by 2050, of which 20% could potentially be avoided by circular usage from decommissioned turbines but only if recycling technologies are developed or, better still, magnets are designed for reuse. Because neodymium is deemed to be a ‘critical material’, these perspectives are vital information for the formation of policy related to wind-energy provisioning, to domestic production, and to the importation of the rare-earth elements that would be required.
Rare earths elements (REE) are considered as strategic resources because they interact with business and gov-ernments' direct policy interventions. Policy interventions can have a major effect on security of rare earth supply (Kooroshy et al., 2015). The purpose of this study is to scrutinize China's REE policies and its impacts on the supply chain resilience. We analyze the supply chain dynamics by specifically targeting a number of Chinese REE policies that have disruptive tendencies. We analyze various policies placing the price at the center as an overarching feedback loop. In other words, we focus on how price responds to various resilience influencing mechanisms such as diversity of supply, regulatory frameworks, and stockpiling. In the process, we investigate Chinese influence on rest of the world (RoW) supply chain and dynamics inside the Chinese supply chain as there are two different layers of supply chain one for China and another one for rest of the world. We show that the supply chain is a complex phenomenon and resilience of a system is not solely dependent on physical disruptions but also on dynamic factors such as societal and geo-political (eg. environmental regulation, speculative market and export ban). We identify links and interdependencies even where data is not readily available and examine how the overall system reacts to various constraints and disruptions.
We explore the long-term demand and supply potentials of rare earth elements in alternative energy vehicles (AEVs) in the United States until 2050. Using a stock-flow model, we compare a baseline scenario with scenarios that incorporate an exemplary technological innovation: a novel aluminum–cerium–magnesium alloy. We find that the introduction of the novel alloy demonstrates that even low penetration rates can exceed domestic cerium production capacity, illustrating possible consequences of technological innovations to material supply and demand. End-of-life vehicles can, however, overtake domestic mining as a source of materials, calling for proper technologies and policies to utilize this emerging source. The long-term importing of critical materials in manufactured and semi-manufactured products shifts the location of material stocks and hence future secondary supply of high-value materials, culminating in a double benefit to the importing country. This modeling approach is adaptable to the study of varied scenarios and materials, linking technologies with supply and demand dynamics in order to understand their potential economic and environmental consequences.
Increasing demand of abundant co-product rare earths such as cerium and lanthanum has become a focus for improving mine economics. The recent development of an aluminum-cerium (Al-Ce) alloy targeted toward broad market adoption in the automotive industry is one recent example. This alloy has shown exceptional mechanical properties and cost-saving potential. However, since market adoption is unknown, impacts of this alloy on Ce demand remains uncertain. We estimate Al-Ce impacts by simulating adoption in different automotive sectors using a dynamic material flow analysis model. We then project future Ce content in the recycled Al stream given current recycling practices. We also compute the required segregation given different Ce impurity tolerances of existing automotive Al alloys. Finally, once secondary supply is derived from segregation, we calculate primary Ce demand. Results showed that segregation of Al-Ce components from non-AlCe automotive Al components is needed for most adoption scenarios and impurity thresholds. Ce metal demand was found to be lowest at 1000 mt/yr if the target market is light duty trucks. If Al-Ce could penetrate the High Efficiency Spark Ignition market (i.e., turbocharger market), Ce demand could reach 23,200 mt Ce/year in 2045, without accounting for Chinese and Australian Ce primary production capacity. When accounting for primary Ce production capacity, demand could reach up to 16,200 mt/yr.
Environmental technologies depend on raw materials, some of which are subject to volatile costs and availability concerns. One way to address these concerns is through substitution, of which there are many types. An important form of substitution in the short term is adopting an alternative production process, yielding a material with the same functional properties with less material input. In effect, technology substitutes for material. This study elucidates the role increased and uncertain material costs play in inducing different substitution types in the short to medium term. Specifically, this paper uses an expert survey to determine the relative importance of eight specific industry responses taken by magnet and wind turbine manufacturers in response to the 2010/2011 rare-earth price spike through 2016. Statistical tests show adopting an existing production process for magnets was the most important response, followed by cost pass-through, using an alternate magnet grade in a redesigned generator system, and using alternate systems altogether. The paper also provides specific findings for the magnet and wind turbine industries with respect to each substitution type.
This study explores the effects of Chinese rare earth stockpiling, environmental taxation, and improvements in recovery rates on rare earth markets. It uses a Stackelberg model with a leading producer (legal Chinese producers) and two sequential followers (illegal Chinese producers and the Mount Weld mine in Australia), each producing multiple rare earths. The model is parameterized for the production and prices of separated rare earth oxides (REOs) from ore. Counterfactuals involving Chinese policies are compared to the no-policy, business-as-usual (BAU) scenario. The five counterfactuals are: (1) further Chinese State Reserve Bureau (SRB) stockpiling of neodymium, (2) further SRB stockpiling of dysprosium, (3) an environmental tax on the production of legal Chinese rare earths, (4) increased recovery rates of neodymium at legal Chinese operations, and (5) increased recovery rates of dysprosium also at legal Chinese operations. The BAU scenario and five counterfactuals are run with (a) four different levels of reference illegal Chinese production and (b) with and without the Chinese production quota, yielding 48 total outcomes (6×4×2). The first finding is that any SRB stockpile purchase increases the price of the stockpiled REO and increases legal Chinese ore production. However, given co-production, increased ore production involves more production of all REOs, and the prices of non-stockpiled REOs decrease. Thus if the stockpiled REO represents a large (small) portion of illegal Chinese and Mount Weld revenue, then illegal Chinese producers and the Mount Weld mine will increase (decrease) their production. An environmental tax decreases legal Chinese production, increases production by illegal Chinese producers and Mount Weld, and increases prices of all REOs. Increased legal Chinese recovery rates lead to increased legal Chinese production, decreased production by illegal Chinese producers and Mount Weld, and decreased REO prices. Increased levels of reference illegal Chinese production (a) exacerbate the policy-driven production increases or dampen production reductions of illegal producers and (b) conversely, for legal Chinese producers, reduce policy-driven production increases and further increase production reductions.
China was in the past the main driver when analysing rare earth prices and their market, since it commercialised around the 90% of the world's supply. After a cut in its exports during 2010 and 2011, rare earth prices dramatically spiked. The world's reaction to this fact was the development of a huge amount of mining projects outside China, many of whom failed when prices fell again. Nevertheless, several of them survived.
This paper analyses in first place the future trend of rare earth elements prices in order to contrast the stable tendency forecasted by different providers of price assessments and market data. Secondly, it studies in deep five ready-to-go rare earths mining projects around the world: Nechalacho Project (North-west Territories, Canada); Zandkopsdrift Project (Northern Cape, South Africa); Bear Lodge Project (Wyoming, USA); Kvanefjeld Project (Southern Greenland); and Dubbo Zirconia Project (New South Wales, Australia). The main purposes being to give an “order of magnitude” both technical and economic of this specific mining industry; to provide a tool for investors, potential investors and professional advisers addressing rare earth mining investment analysis; and to facilitate the development of preliminary economic assessments of future rare earth mining projects. These aims will also help to fight against several systemic problems of the rare earth market: lack of trust, market opacity, and short versus long-term approaches and profit orientation.
Conclusions clearly show that despite the complexity of rare earth mineral deposits and the fact that their mining operation usually includes different by-products, the evaluation of rare earth mining investments does not present much more difficulty than in the case of single element mining projects. Forecasted prices used in these economic studies are the Achilles’ heel of nowadays rare earth mining investment analysis.
Finally, although differences in demand of different rare earth elements will make really difficult to achieve “a priori” a market in balance, the five studied projects are anticipated to cover approximately the third part of the total rare earth consumption in the world. When their dysprosium oxide production was analysed, the resulting proportion for the most critical rare earth element based on its role in clean energy together with its biggest supply risk was almost the same, something optimistic regarding the achievement of a balanced market outside China.