Managing Commodity Price Risk

CHAPTER 7

Political Risk: The Case of Heavy Rare Earth Metals

Introduction

A myriad of risk sources amplify commodity price volatility, as discussed throughout this book. One specific case in point that we wish to elaborate more on concerns the influence of political risk. In today’s global supply chains, firms increasingly interact with supply chain members in countries such as China, Russia, and Brazil, which to a high degree are either state-owned¹ or significantly influenced by national policy agendas.² We will discuss this source of risk given the recent example and developments occurring with heavy rare earth metals (HREM).

Understanding the Heavy Rare Earth Metals Market

The sourcing of HREM from China provides a particularly information-rich ...