Manage Raw Material Supply Risks
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Critical Issues Manage Raw Material Supply Risks Anthony Y. Ku Some materials are more vulnerable to Stephen Hung GE Global Research supply disruptions than others. Identify these materials and implement strategies to address challenges related to them. odern society depends on a wide and increasing European Union. The EU study evaluated the supply array of raw materials — from simple steels to risks and importance of 41 raw materials not produced Mesoteric compounds derived from the far corners in Europe yet essential to its economic vitality over the of the periodic table — to produce the products that enrich 2010–2020 time period (4). Three indicators were cal- our lives and sustain our standard of living. Some of these culated for each material — supply risk, environmental materials are particularly vulnerable to supply disrup- policy risk, and economic importance. Supply risks were tions due to natural disasters, geopolitics, or step changes calculated based on the political and economic stability in demand brought about by technological breakthroughs. of countries producing the raw materials, the extent that Materials criticality is concerned with understanding these production occurs at a small number of sources, and the dynamics and finding ways to ensure adequate near- and potential for recycling or substitution. The environmental long-term supply of these materials. policy risk accounts for the possibility that measures or This article introduces methods to identify at-risk, policies may be implemented by a producing country to critical materials, and outlines general strategies to address protect the environment, and in so doing, endanger the challenges related to these materials. It then highlights supply of raw materials to the EU. The EU team calculated some of the technical aspects associated with the produc- an economic importance score based on the value that the tion, processing, and recycling of such materials. raw material added to different sectors of the EU economy. For a material to be considered critical, it must face high What are critical materials? supply risks or high environmental country risks and be of Over the past decade, both public and private sectors high economic importance. have begun to identify critical materials using metrics such This study designated 14 materials as critical (Figure 1, as the risk of supply disruption and the impact of disruption upper-right section). These critical materials include: rare (1–5). While specific definitions of critical materials vary earth elements used in catalysis, lighting, and permanent- according to the user and time frame of interest, criticality magnet motors; magnesium used in lightweight alloys; assessments have proven to be a valuable tool in directing niobium, which is added to steel to improve its strength attention and resources toward materials with the greatest and corrosion resistance; and platinum group metals risks and economic impacts. To highlight the similarities (PGM) used in catalysis and electronics. Twelve additional and differences in how organizations define criticality, materials (Figure 1, lower-right section) were identified Figures 1–3 compare the results of assessments by the as economically important but at lower risk; the study European Union (EU), the U.S. Dept. of Energy (DOE), team noted that some of these materials are vulnerable to and the General Electric Co. (GE), respectively. The critical changes in the supply situation that could escalate them materials appear in the upper right sections of the plots. into the critical category. 28 www.aiche.org/cep September 2014 CEP Copyright © 2014 American Institute of Chemical Engineers (AIChE) 5.0 version of the conceptual method × Rare Earth Elements developed by the National Acad- 4.5 emy of Sciences to assess these 4.0 clean-energy materials based on PGM two criticality metrics: impor- 3.5 tance to clean energy and supply 3.0 risk. Scores for each of the two Nb + Ge metrics ranged from least critical Sb Mg 2.5 Ga or important (1) to most critical or important (4). The importance- Supply Risk 2.0 In × Fluorspar W to-clean-energy metric accounts ×Barytes × Tantalum 1.5 for two attributes of each mate- Be Graphite∗ ∗ Co rial: clean-energy demand and 1.0 × Re Magnesite × Cr material substitution limitations, Perlite Gypsum Li × Limestone V × +Borate Clays ∗Silica Te Mn which were weighted 75% and 0.5 Talc Mo ∗ × + Diatomite ∗ ×Bentonite Fe Zn ∗ ∗ Ag + × Bauxite ∗Ni Feldspar Ti Cu Al 25%, respectively. Supply risk 0 is based on five risk categories: 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 basic availability (weighted Economic Importance 40%); competing technology p Figure 1. The EU critical materials analysis for the 2010–2020 time period identified 14 critical materials demand (10%); political, regula- (circled in the upper-right section). Source: (4). tory, and social factors (20%); co-dependency on other markets Earlier this summer, the EU released results of an (10%); and producer diversity (20%). updated analysis that includes more raw materials and The results are shown in Figure 2 as a plot of each mate- updated data. It is available at: http://ec.europa.eu/ rial’s importance to clean-energy technologies vs. its supply enterprise/policies/raw-materials/critical/index_en.htm. risk. The critical materials appear in the upper-right corners U.S. Dept. of Energy. The DOE performed an assess- and include all the rare earth elements, including euro- ment of critical materials used in four clean-energy tech- pium (Eu), terbium (Tb), and yttrium (Y) for lighting, and nologies — wind turbines, electric vehicles, solar cells, and neodymium (Nd) and dysprosium (Dy) used for permanent energy-efficient lighting — over the near term (2011–2015) magnets in electric vehicles and some wind-turbine drives. and medium term (2015–2020) (3). DOE used a modified A few other elements, including lithium for batteries and Neodymium Dysprosium Yttrium Dysprosium 4 Europium 4 Terbium Europium Cerium Neodymium Lithium Terbium Yttrium 3 Lanthanum 3 Tellurium Tellurium Lithium Cobalt Indium Nickel Cerium Nickel Lanthanum Gallium Cobalt Manganese 2 Manganese 2 Gallium Praseodymium Praseodymium Indium Importance to Clean Energy Importance to Clean Energy Samarium Samarium 1 1 12 34 12 34 Supply Risk Supply Risk Not Critical Near-Critical Critical Not Critical Near-Critical Critical p Figure 2. The DOE identified critical materials related to clean-energy technologies for the short term (left) and the medium term (right). Source: (3). Copyright © 2014 American Institute of Chemical Engineers (AIChE) CEP September 2014 www.aiche.org/cep 29 Critical Issues Higher Sourcing: Ensure supply through Shorter fixed-price contracts, options, and Broaden strategic inventories. Material Manufacturing Efficiency: Reduce or Sources recycle waste via advanced manufacturing processes. Recovery: Recover material from Optimize Material end-of-life products, repair, and Use remanufacture. Timing Material Redesign or Substitution: Reduce or eliminate at-risk elements, or Redesign Materials Impact on GE Operations use an alternative material. and System Substitution: Use an alternative Systems Lower technology to satisfy a customer’s needs. Longer Lower Higher Supply and Price Risk p Figure 4. Various strategies can be employed to address issues related to critical materials. One corporation relied on sourcing, manufacturing effi- Rare Earth Elements Other Elements ciency, recycling, material substitution, and system substitution. Source: (6). p Figure 3. General Electric assessed critical materials used in its Figure 4 summarizes the approaches used by one cor- manufacturing and commercial operations. Elements are assigned scores poration (6). Sourcing arrangements and strategic invento- in two areas — supply and price risk, and impact on GE operations. Each ries offer a buffer against short-term volatility in materials circle on the plot represents a different element, and the size of the circle represents the annual amount spent on the element in 2008. The orange supply and pricing. Sourcing activities are often combined circles represent individual rare earth elements. Source: (5). with efforts to optimize existing usage through improved manufacturing yields, recovery of manufacturing scrap, tellurium for thin-film solar cells, were rated near-critical. and recycling of end-of-life products. Advanced manu- The DOE results also illustrate the dynamic nature of facturing processes, such as 3D printing, have the potential criticality. Market trends related to the adoption rates of to increase yields and enable mass-production of new, different clean-energy technologies are expected to reduce less-materials-intensive designs. Investments in research the criticality of rare earth elements used in lighting, while and development can also yield new technology options increasing the criticality of materials used in magnets and — either alternative materials that are made using less of energy-storage devices. a critical element, or alternative system designs that avoid General Electric. Criticality assessments performed the use of a particular material entirely. These approaches at the level of an individual company can also take into are complementary, and the details vary depending on the account market competition and price volatility. GE was specific elements and applications. Moreover, different the first company to publish the results of a corporate entities and organizations will pursue these approaches criticality