Sustainable Consumption Institute

Abstract

We introduce several new resilience metrics for quantifying the resilience of critical material supply chains to disruptions and validate these metrics using the 2010 rare earth element (REE) crisis as a case study. Our method is a novel application of Event Sequence Analysis, supplemented with interviews of actors across the entire supply chain. We discuss resilience mechanisms in quantitative terms–time lags, response speeds, and maximum magnitudes–and in light of cultural differences between Japanese and European corporate practice. This quantification is crucial if resilience is ever to be taken into account in criticality assessments and a step toward determining supply and demand elasticities in the REE supply chain. We find that the REE system showed resilience mainly through substitution and increased non-Chinese primary production, with a distinct role for stockpiling. Overall, annual substitution rates reached 10% of total demand. Non-Chinese primary production ramped up at a speed of 4% of total market volume per year. The compound effect of these mechanisms was that recovery from the 2010 disruption took two years. The supply disruption did not nudge a system toward an appreciable degree of recycling. This finding has important implications for the circular economy concept, indicating that quite a long period of sustained material constraints will be necessary for a production-consumption system to naturally evolve toward a circular configuration.

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