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Supply Chains & Critical CleanTech Shortages


Record-long times from order to delivery have become common. Wide-scale shortages of essential basic materials seem in the daily news. Suddenly, increased commodities pricing creates confusion. Transportation sector difficulties permeate across industries. Why? Roaring demand for goods have created backlogs due to weaknesses in supply chains, and manufacturers started drawing down on inventories last month to meet demand. Business warehouses seem almost bare.

The US economy contracted 3.5% in 2020, its worst performance in 74 years. Most economists expect double-digit GDP growth this quarter, which would position the economy to achieve growth of at least 7% — the fastest since 1984.

The Harvard Business Review (HBR) argues that the Covid-19 pandemic has dramatically exposed the vulnerabilities of global supply chains, and one fundamental cause is the erosion of the US “industrial commons” — the domestic capabilities needed to support the development and production of many goods deemed critical to US interests.

The Rare Earths Effect on Global Supply Chains

A May report released by Argonne National Laboratory explains how rare earth materials are essential to a variety of industries and how mine shutdowns have affected supply lines. Disruptions to rare earth supplies can have wide-ranging consequences, as they are essential to many emerging technologies, including those that support a clean energy future.

Right now, China dominates the global rare earths market. The country produces an estimated 58% of mined rare earths, and it controls roughly 85% of the world’s refining capacity. A variety of disruptive events can affect the supply of rare earth materials, including natural disasters, labor disputes, construction delays and, of course, a pandemic.

Argonne researchers analyzed the potential effects of 3 supply disruption scenarios on 10 rare earth elements, along with a handful of associated compounds, to determine the market effects. The results of the study highlighted which rare earth elements may be particularly vulnerable to disruptions. The largest price increases in response to disruptions occurred for dysprosium oxide, which is used in permanent magnets, specialty alloys, and other applications.

In general, the analysis found that in the case of temporary scenarios — a 1-year export stoppage and a 2-year mine shutdown — price impacts tended to extend years beyond the disruption period. Effects on production, capacity, and demand also could potentially last longer. The model suggested some mines that started up outside of China in response to a disruption would not likely be able to keep operating after primary supplies recovered.

Indeed, Tesla CEO Elon Musk has acknowledged that “microcontroller chips” are a particular challenge for the all-electric car company. Vacillating between positions that he’s “never seen anything like it” and the “fear of running out,” Musk pointed to rare earth metals at the core of the problem.

The Argonne study team is now working on changes to the model that will help align it with US goals to lower greenhouse gas emissions. They are enhancing representations of rare earth magnet markets for energy-efficient motors, including those used in wind turbines and electric vehicles. And new agent-based models of the lithium-ion battery supply chain will assess how shortages of global materials might affect the adoption of battery technologies important to electric vehicle markets.

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