Πέμπτη, 20 Οκτωβρίου 2011

Scenario study on rare earths: Availability and price developments will be the critical success factors for many high-tech companies | Roland Berger News | Media | Strategy Consultants

Munich, October 9, 2011

  • Prices for rare earths have skyrocketed: worldwide market volumes in 2011 have grown to an estimated EUR 27 billion
  • Price developments are hurting profitability or are even threatening the existence of some high-tech companies, especially in the automotive and renewable energy sectors
  • China maintains a monopoly in extracting and processing rare earths
  • Companies must develop the right strategies to ensure their supplies
Due to skyrocketing prices, worldwide market volumes for the 17 elements known as "rare earths" are expected to rise to EUR 27 billion in 2011. Just three years ago, global market volumes for these metals amounted to only EUR 2.4 billion. Besides greater industry demand, the reason for exploding prices is primarily due to China's monopoly position as the global supplier. High-tech businesses, especially in the automotive or renewable energy sectors, are being hit particularly hard by these developments. Many companies have realized what's going on and are giving this issue top management attention. These are the findings of a study by Roland Berger Strategy Consultants entitled "The Rare Earth Challenge."

"The availability of rare earths at competitive prices is currently playing a key role in production at many technology companies," explains Thomas Rinn, Partner at Roland Berger. "It's no surprise that top management is now focusing on the topic of rare earths. Many companies are facing the challenge of dealing with a resource that is in increasingly short supply and becoming more expensive."

High-tech businesses hit especially hard

The share of rare earths in the production at many companies has risen considerably over the past few years. Simultaneously, massive price increases have led to estimated global market volumes of rare earths totaling EUR 27 billion by the end of 2011. The 17 rare earth elements are used mainly in the automotive industry for manufacturing electric motors or in renewable energies for wind turbines. Of the approx. 137,000 tons of raw materials belonging to the group of rare earths, which companies will probably consume in 2011, the lion's share (30%) is used for glass and ceramic production. Approx. 20% is used to make magnets, e.g. for car electric motors or wind turbine generators. Furthermore, rare earths can be found in catalytic converters (19%), metal alloys and batteries (18%), or in the lighting industry, e.g. for LED lights (7%).

China's monopoly position

The price explosion for rare earths is due to two factors in particular: rising demand in the industry and China's monopoly position as the main supplier of these metals. China controls the global market. This is due to the fact that it extracts and processes 95% of the rare earth elements. Price developments are hurting the profitability of many businesses, or are even threatening their existence in some cases. "The rising demand for hybrid and electric drivetrains in the car industry means more rare earths are required, especially by suppliers," explains Thomas Schlick, Partner at Roland Berger. "If the prices for these raw materials skyrocket out of control, suppliers will not be able to pass on these price increases and many companies will find themselves on the ropes."

Alternative strategies

In light of the sharp price increases and scarce resources, affected businesses are now facing the challenge of developing a suitable strategy to remain competitive. "Companies are giving two approaches top priority," explains Sebastian Durst from Roland Berger. "On the one hand, companies are trying to reduce their consumption of rare earths by using innovative technologies. On the other hand, business are looking into different sourcing strategies." For instance, companies are trying to renegotiate prices with suppliers of rare earths or set up framework agreements. Alternatively, many are looking into new supply sources or are taking a direct stake in upstream suppliers. At the same time, some companies are trying to pass on the higher costs to their customers. The option of shifting production to China to benefit from low local prices for raw materials has so far hardly been looked into.

Δεν υπάρχουν σχόλια:

Δημοσίευση σχολίου