Natural Resources, 2015, 6, 56-78 Published Online January 2015 in SciRes. http://www.scirp.org/journal/nr http://dx.doi.org/10.4236/nr.2015.61007 Measuring Criticality of Raw Materials: An Empirical Approach Assessing the Supply Risk Dimension of Commodity Criticality Herbert Mayer, Benedikt Gleich Institute for Materials Resource Management, University of Augsburg, Augsburg, Germany Email:
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[email protected] Received 6 January 2015; accepted 25 January 2015; published 28 January 2015 Copyright © 2015 by authors and Scientific Research Publishing Inc. This work is licensed under the Creative Commons Attribution International License (CC BY). http://creativecommons.org/licenses/by/4.0/ Abstract Providing a sustainable and reliable supply of raw materials at economic prices has become es- sential to industrialized economies. Therefore, the need for both economical and sustainable me- thods and strategies for the management of raw materials has been postulated to enable compa- nies and economies to counteract dramatic effects of supply disruptions, or at least to provide early warnings. The relevant studies assign generic weights to different driving factors and therefrom derive criticality indexes. However, it often remains open how to interpret the resulting measures and how to apply them practically. Here we show that based on current commodity key figures, it is possible to empirically determine the risk for future price increases and fluctuations. Thus, we can identify future supply risks and incorporate their patterns into an empirically calibrated crit- icality measurement. To this end, we apply the well-known compounding framework used by many companies for their financial planning, calculating net present values and volatility from the pre- dicted future price development.