Strategic Metal Report

China's Growing Role in the Production and Supply of Minor Metals: Part III

 Part III: Responses by International End-Users

Increasing dependence on Chinese minor metal production has forced end-users to consider how best to deal with greater price volatility and a heightened risk of supply disruptions. In part one of our series on the effect of growing dependence on Chinese production and supply of minor metals, we showed that China’s share of global minor metal production rose 34 percent between 2000 and 2009. In part two, we outlined the key factors in this rise, including natural resource reserves, domestic manufacturing growth, as well as industrial development, environmental and export policies, and concluded that the major impacts on end-users are an increase in price volatility and a greater risk of supply disruptions. In this, the final part, we will discuss the options available to end-users in order to deal with price volatility and risks of supply disruptions.

China's Growing Role in the Production and Supply of Minor Metals: Part II

 

 Part II: Factors, Impacts & Trends - Analyzing the Growing Dependence on Chinese Minor Metal Production

The minor metals industry is not the only industry to see a large share of its global production move to China over the past ten years. Yet, unlike most manufacturing industries, minor metals do not have the freedom to change locations simply to capitalize on low production costs. Natural resource extraction, it goes without saying, is inherently dependent on the local geology. Why then, has the global production of minor metals become significantly more dependent on China over the past ten years? In the first part of our series on the effect of China’s growing production and supply of minor metals, SMI Ltd. concluded, based on the most recent USGS statistics, that China’s share of global minor metal production increased from just over 29 percent in 2000 to nearly 40 percent in 2009. In this, the second part, we will outline the main factors why this shift has occurred, before discussing its impacts on end-users and analyzing trends that may influence the industry over the coming five to ten years. 

China's Growing Role in the Production and Supply of Minor Metals: Part I

 Part I: Measuring Dependence on Chinese Minor Metals

 Whether they produce water treatment chemicals with lanthanum chloride, antifriction alloy bearings using antimony metal or any other of the countless minor metal end-products, these manufacturers all have one thing in common, their raw materials more likely come from China than from any other country.

China currently produces about 40 percent of the world’s minor metals, a share that has been steadily increasing over the past ten years. Manufacturers who require minor metal products are well aware of the influence that Chinese supply has on the price of many metals, but not all are conscious of critical changes that have recently effected both the availability and prices of numerous minor metals.

Two of the most important changes for the minor metal industry since 2000 have been the increase in China’s share of global minor metal production and government policies within China aimed at supporting domestic production and ensuring material availability for Chinese end-users. These developments have not only led to international reliance on Chinese supplies of strategic metals, but have also resulted in greater Chinese control over minor metal prices.

Over the past two years, the rare earth industry has received much media attention because it epitomizes these issues, igniting western concern about heavy reliance on foreign sources of critical resources. However, as we examine in this report, these issues stretch beyond rare earths, affecting many minor metal supply chains and a wide-range of industries. Only recently have companies and governments recognized this situation and begun discussing methods to avoid supply shortages.

In the first part of this three-part report on the effect of China’s role as a key supplier of primary minor metal products, we analyze recent minor metal production trends while focusing on China’s growing role as the world’s major producer. Part two of the series will examine the factors behind growing dependence on China for minor metal production with consideration for both Chinese domestic policies and macro-economic influences. Finally, in part three, we will develop on the impacts of the increasing dependence on Chinese minor metal production and discuss the responses from, and options for, international end-users to reduce the consequent effects of price volatility and risk of supply disruptions.

Defining Minor & Strategic Metals

The term ‘minor metals’, although widely-used, has always lacked an effective, clear definition. Even the Minor Metal Trade Association (MMTA), which is generally regarded as the prevailing authority on such metals, does not have a working definition for the term. The term 'strategic metals', by contrast, is more specific and commonly refers to metals used in national defense, aerospace and energy industries. In this article, we consider working definitions for both the terms 'minor metals' and 'strategic metals'.