Rare earth price surge and global supply chain response

An article in Fortune (Nov 7, 2011) describes the impact of the 1500 % price increase for rare earth metals from 2009 to 2010, the result of a 50 % cut in Chinese exports of rare earth metals.  With China mining 97 % of the world’s supply, this cut sent prices soaring. The result was a $ 1 billion investment by Molycorp to open up their mines in California, but with newer technology that is more environmentally friendly.   New mines were announced in Australia, Mongolia, Kazakhastan and Afghanistan.  But manufacturers in Japan modified designs to decrease rare earth usage. The result – a projected 13 % reduction in demand when supplies seemed to surge Prices of rare earths are now dropping significantly.  How should the global supply chain react to this price volatility – hold on to the extra capacity or cut it ? Should manufacturers continue to focus on decreased usage as a hedge against supply volatility ? Is this the bullwhip effect in rare earth supply chains ?

About aviyer2010

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