۱- Introduction

۲- Method and data

۳- Results

۴- Discussion and implications

References

Abstract

Rare earths elements (REE) are considered as strategic resources because they interact with business and governments’ 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.

Introduction

Disruptions can have a major effect on security of supply. This is especially true for critical materials. There are many examples of disruptions–ranging from floods to trade disputes to civil wars–and in the past decades severe supply chain disruptions affected a significant number of materials. Conceptually, disruptions can happen either slow or fast, and on the supply or demand side. This classification gives four types, as seen in Table 1. The most prominent method of determining and analyzing material criticality, Graedel et al. (2012), primarily takes disruptions into account through mining investment risk indicators which are in turn based on political stability of the host country through the ratio of foreign and domestic supply. This ratio is used to determine the vulnerability to supply disruptions. An alternative viewpoint to supply chain disruptions is that of trade flows. Trade and trade disruptions can be analyzed in physical terms. For example, Gholz and Daryl, (2010) discussed the possibility of a disruption to global oil trade if Iran would use anti-ship missiles to block the Strait of Hormuz. Olson (2015) speculates that only an interruption of service at a major port would be able to significantly disrupt global trade in aluminum. Mancheri et al. (2018) found that in case of tantalum, physical disruptions did not affect the supply chain seriously as the industry’s ability to respond is well characterized by resilience-promoting mechanisms such as diversity of supply, stockpiling, and substitution. In an attempt to predict which supply chains will be disrupted beyond identifying which materials are critical, resilience is a useful way of thinking about how to deal with inevitable disruptions of all types, especially those of the unexpected kind. To do so, we investigate a number rare earth policies that China introduced in post 2010 crisis and evaluate how these policies affect the REE supply chain, and prices. By applying the resilience framework, we try to generate a wider understanding of legislative and environmental risk and its impact on the global REE supply chain.