2011 was for the minor metals, like it was for many commodities, a year of two halves. The first few months saw prices rising to near - and sometimes past - their pre-financial crisis levels, as end-users breathed a sigh of relief when the worst of the crisis seemed to have passed. But the euphoria was short-lived.
By June and July, it was becoming evident that the sovereign debt levels in the US and Europe were going to weigh heavily on governments' abilities to continue supporting economic recovery with further fiscal stimulus. Markets and commodity prices stuttered. Copper started to fall from its record levels by the end of July and the industrial minor metals, molybdenum, cobalt, tungsten and manganese, followed.
By September, all eyes had turned east to see whether China could pick-up the slack in demand, as it had two years earlier. But China's hands seemed tied as it continues to try and address inflation and liquidity issues that have stemmed from its 2008 monetary stimulus.
The British Geological Survey (BGS) is the latest government body to release its opinion on what strategic elements are at the greatest risk to supply disruptions. The BGR's Risk List 2011 analyzes 52 "chemical elements" (primarily metal elements) and ranks them according to what it determines to be their risk to supply.
Risk to supply was determined by BGS by scoring quantitative data for four criteria: (1) scarcity, (2) production concentration, (3) reserve base distribution and (4) governance. Equal weight was given to each criterion.
According the Risk List, the 25 elements - or groups of elements - most at risk to supply disruptions are:
For the complete list, click here (.pdf download).
As opposed to many similar analyses, the BGS Risk List does not take into account end-use applications of the elements and, therefore, does not evaluate the 'criticality' or strategic nature of the elements. Instead, the BGS simply puts forth what it sees as the elements most at risk to supply disruptions.
Proxies:
One of the major problems with creating an analysis of this type is whether the proxy data accurately evaluates what, in theory, it is intended to analyze. In this case, there are four criteria that the authors believe reflect the threat of supply disruptions. Supply concentration is very much related to the risk to supply and is aptly measured by the amount of production coming from specific countries. However, scarcity and reserve distribution are not as clearly distinguishable.
To measure scarcity by looking at content of an element in the earth's crust ignores the fact that not all ore bodies are created equal. Gallium found in gallite is not the same as gallium found in bauxite, just as zirconium found in kosnarite is not the same as zirconium found in the mineral zircon. This problem also affects the evaluation of reserve distribution. Technical separation issues and simple economics cannot be ignored.
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In recent years, a number of reports on critical and strategic mineral resources have been commissioned by governments and produced by various research organizations and consulting firms. These reports have primarily come in response to China’s growing restrictions on the export of rare earth elements (REEs) and an increased global awareness of the importance of REEs and many other strategic metals integral to national security and economic growth. The European Community commissioned paper Critical Raw Materials for the EU, and consequent report, Material Risk: Access to Technology Minerals, produced by Ernst & Young in September 2010, exemplify the prevailing concern about dependence on foreign supplies of strategic raw materials.
The initial report by the EC, also published in 2010, identified 14 raw materials as critical to European industry, whereas, Material Risk explores “the supply risks facing producers and consumers of these technology minerals, and assess(es) the European mining and metals sectors ability to respond to the supply chain challenge.” While recognizing that the supply of ‘technology metals’ is under pressure, there is no stated recognition that much of this perceived pressure is due to the world’s increasing reliance on Chinese primary production of strategic minerals, including REEs, antimony, bismuth, indium, gallium, germanium and silicon. Nevertheless, the question that remains is: What role, if any, do governments have in supporting domestic industries reliant on critical raw materials or strategic metals?
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Will states use access to or possession of minerals as a strategic resource? Will relations between states that have access to minerals and those that don’t change due to scarcity? Are future wars about minerals rather than oil, territory or water?
These are the questions posed in a report produced last year by the Hague Centre for Strategic Studies, which examines mineral scarcity and the potential impacts on resource markets and security issues. The report, entitled Scarcity of Minerals: A Strategic Security Issue, uses empirical data and national policies to assess the security and geopolitical impact of mineral scarcity. In its 145 page entirety, the report is a thorough read, providing insightful perspectives on how government policies and technological development are shaping global supply and demand for strategic minerals.
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