❗Geopolitical Tensions impact Supply Chains AND Balance of Power
⚠️Heads up, Procurement & Supply Chain Folks. Building and executing robust category strategies and preventing risks arising from complex supply chains and critical minerals/rare earths require a deep understanding of your supplier structure, down to the raw material sources. Many new regulations, such as the German LkSG or the European CSDDD, also require this.
These days, it is essential to fully understand your supply chains, your business partners, and geopolitical developments to identify, assess, and prevent (commodity) risks, particularly those coming from regions that we would consider medium or high-risk regions. Critical minerals such as copper, cobalt, lithium, and rare earths are often used in climate, automotive, energy, digital technology, and military equipment.
📌Lithium, nickel, and cobalt are considered HIGH “Importance” & “Supply risk” from 2025 to 2035 by the U.S Department of Energy
📌Gallium: needed to build semiconductors essential for missile guidance systems and computer systems (not produced in the US)
📌Germanium: needed for infrared night vision goggles and solar panels on satellites (not produced in the US)
📌Titanium: used for aerospace components, missiles, armor plating, and naval ships. The US is reliant on 90% of titanium ore imports (US production fell from 140k to 50k tons in 2020)
📌Niobium: used in superalloys for jet engines (not produced in the US)
The high demand has geopolitical consequences that we can’t ignore. China dominates about two-thirds of mineral processing worldwide, refining over half of aluminum, lithium, and cobalt and 90% of rare earths. This dominance gives China, in many ways, immense power over global supply chains and economies.
However, we probably see a small but important development here. From a China-dominated monopoly to an oligopoly, including countries like the U.S., Australia, Myanmar, and Thailand, rare earth production is increasing, challenging China’s supremacy. Supply security and economic resilience are not just important to corporations but also to maintaining the balance of power (the US Congressional Research Service, for instance, published the impact of rare earths on US fighter jets, vessels, and submarines).
👉 If you are a Risk Manager, CPO, Category Manager/Buyer, or Supply Chain Leader, follow not just the market price. Understand the rationale behind it and plan accordingly. Your CFO and your CEO need your comprehensive expertise, not just on pricing. We all are becoming Risk Analysts above and beyond cost and savings.
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