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PwC warns of a ‘ticking timebomb’ in the supply chain

The chemical, energy and auto industries are in ‘red alert’ over the future disruption of rare earth metals supply, according to PwC.

PwC surveyed some of the largest manufacturing businesses across manufacturing, chemicals, automotive, energy/renewable energy, aviation, metals, infrastructure and high-tech hardware about the impacts we can expect to see from growing scarcity of rare earth metals over the next five years.

Of these, business leaders in automotive, chemicals, and energy sectors fear they will be hit hardest.

PwC’s global sustainability leader, Malcolm Preston, said: “Put simply, many businesses now recognise that we are living beyond the planet's means. New business models will be fundamental to the ability to respond appropriately to the risks and opportunities posed by the scarcity of minerals and metals.”

Among the minerals & metals on the ‘critical’ list are:

  • Beryllium: used as a lightweight component in military equipment and in the aerospace industry. It is used in high-speed aircraft, missiles, space vehicles and communication satellites;
  • Cobalt: a material used in industrial manufacturing. Used in jet turbine engines and automotive rechargeable batteries;
  • Tantalum: used in mobile phones, computers and automotive electronics;
  • Flurospar: used in construction, cement, glass, iron and steel castings.
  • Lithium: used in wind turbines and lithium-ion batteries in hybrid cars

Elsewhere in the survey, 77 percent of major manufacturing companies consider minerals and metals scarcity as an important issue for their business, but are concerned that only 39 percent of their customers do.

Chemicals and energy and utilities sectors believe they will be severely impacted until 2016 with the percentage of chemical businesses that expect to be affected by this scarcity will triple over the next five years.

The risk of scarcity across all sectors is expected to rise significantly, leading to supply instability and potential disruptions in the next five years, but this will also create opportunities for competitive advantage.

Renewable energy (78 percent), automotive (64 percent) and energy & utilities (57 percent) are all currently experiencing instability of supply. Aviation, high tech and infrastructure sectors are also expecting to experience high rises in supply disruption from now to 2016.

When asked about other primary concerns around scarcity overall, 84 percent cited an increase in demand, 78 percent said it was geopolitics, and 72 percent said extraction shortage.

www.pwc.com/sustainability

•Date: 8th December 2011 • Region: World •Type: Article • Topic: Operational risk

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