Are state stockpiles depleting the commodity markets?
The combination of the ongoing coronavirus crisis and the war in Ukraine was previously seen as a perfect storm for the shortage of critical commodities. According to a study commissioned by the German Federal Ministry for Economic Affairs and Energy from the auditing firm Ernst & Young, another factor could soon be added to the mix: The increasing state storage of technology metals and rare earths.
Four countries, one concept: to prevent market distortions and the resulting supply bottlenecks, China, Japan and South Korea are stockpiling production-critical metals. The USA has also created the “National Defense Stockpile” program to monitor 250 commodities and maintain stocks for 50. China’s national plan for mineral resources has proposed building 103 national energy resource bases to secure supply since 2016. Japan, on the other hand, is taking the step towards implementation and is building stockpiles of rare metals to help the industry make ends meet for 180 days in extreme cases. And in South Korea, the state-owned Korea Resources Corp. is also building up or expanding existing state storage facilities for industrial raw materials.
Meanwhile, in Germany, the industry’s security of supply is at stake. For too long, people in this country were used to “just-in-time production”. Commodities were requested when they were needed in order to save storage costs. Today, this strategy is a bad idea, especially as the new warehouses in Japan and South Korea in particular are diverting increasingly large quantities of commodities that are on the market. Considering that state storage is also being discussed in Europe, the expected volume of technology metals and rare earths flowing off the market in future is even greater. So what needs to be done?
Fortunately, Germany has not (yet?) decided to stockpile technology metals and rare earths. China could take this as an opportunity to impose supply freezes, which would certainly lead to an explosion in prices. It is more advisable to store production-critical commodities via private companies. This is because offers such as that of Noble BC GmbH not only contribute to the industry’s security of supply, but also give investors the chance of attractive returns, including tax-free storage and tax-free sale, as well as the safeguarding of the investment asset in accordance with the latest technical standards.