To Stockpile or Not to Stockpile that is the Rare Earth Question

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Anthony Lipmann, former Chairman of the Minor Metals Trade Association and Managing Director of Lipmann Walton & Co., Ltd delivered a fascinating presentation on whether or not countries (and their governments), ought to stockpile rare earth (or minor) metals. Lipmann walked the audience through an example of a group of Dutch and Malaysian tin traders who back in the early 1900’s bought up 9000 tons of tin. By 1922, the group had no buyers for the tin. Unfortunately, this scenario turns out more often than not, the case.

The notion of stockpiling, according to Lipmann, goes back to the old bible story of Joseph and his ability to interpret dreams while enslaved by the Pharaoh in Egypt. The Pharaoh had dreamed of seven years in which little food would grow. Joseph interpreted his dream by advising Pharaoh that he should save his extra harvests each year so that he could release the grain during the seven lean years. And thus, we have the concept of stockpiling. Lipmann continues by discussing the grandfather of “buffer stocks, a solution first noted in the 1920’s. The solution, according to L. St. Clare Grondona involves understanding how to stockpile materials without a collapse in price. Grondona’s theories around pricing floors and celings became popular over the next 50 years, according to Lipmann.

Stockpiling as a concept however has had some historical missteps. Lipmann walked through several examples including tungsten, stockpiled by the DLA (Defense Logistics Agency). When tungsten prices were high, industry solicited the DLA to release material but the release of that material conflicted with the producers/suppliers of the metal in the market. This pits buyer against supplier. Another conflict involves mercury. Mercury a highly toxic metal has a total ban in the United States. However, the new energy efficient bulbs contain mercury but the EPA bans the import of products with mercury. At the same time, the DLA can’t use the mercury in its existing stockpile. Materials also “go bad and lose some of their chemical and mechanical properties over time. These all represent cases against stockpiling.

Lipmann presented several cases in which national stockpiles could work. In particular, he referenced the strategies of Russia. The Russians have both a mobile and an immobile stockpile. Immobile stockpiles went for disasters whereas mobile stockpiles could be released to industry at any point. When the industry is “short material, the borrower can rely on the stockpile with the caveat that the product would need to be “returned at a pre-agreed upon time frame. Japan also represents an example in support of stockpiles. According to Lipmann, “after the war, they [the Japanese] were not allowed to have an army or a defense so they focused all of their efforts toward the economy. Big Japanese trading houses worked with the stockpiling entity. They study supply lines and then they put investments into developing them. We need only watch Toyota to understand their approach to securing rare earth metal supply.

Ironically, Lipmann himself, a Rhenium trader, does not support the notion of stockpiling though he did ask the audience to vote as to whether or not we felt Rhenium should be stockpiled. The results remain inconclusive, much like the stockpiling debate today.

–Lisa Reisman

Comments (3)

  1. Ian Falconer says:

    There is an alternative to stockpiling in material flow analysis and recycling. Know where the metal is through its life cycle and you can incentivise its return to a recycling pool with targeted actions.
    For example if you are in the tantalum supply chain sponsor a mobile phone handset return drive and pay everyone $5 for the handset that they have had in their draw for the last year, but never used.

    The metal is then still economically active and not as subject to degradation as it may be in a refined form.

    Of course this assumes that the metal you need is has an efficient recycling technology available. Some currently don’t.

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