Improving Wetware

Because technology is never the issue

When the Low Cost Supplier Stops Supplying

Posted by Pete McBreen Wed, 23 Feb 2011 02:59:00 GMT

A parallel to the outsourcing debacles is what is currently happening in the supply of Rare Earths (mainly the transition metals if you remember your periodic table). The rare earth metals are commonly used in high tech components, often for the super strong magnets, but also for lots of other electronic components.

China used to be such a low cost provider that it managed to capture most of the market, all of the other suppliers basically closing their mines. Now China, which produces 97% of the world’s supply of rare earths, slashed its exports to a trickle to feed its growing domestic needs. The link goes to a feel good story about a mine that is trying to ramp up production quickly, but there is still a measure of reality in the storyline

“Bottom line, we fell asleep as a country and as an industry,” Smith said. “We got very used to these really low prices coming out of Asia and never really thought about it from a supply chain standpoint.”

In more and more areas we seem to be bumping up against problems when demand starts to exceed easily available supply. It is not that we are running out, it is just that demand is larger than expected so there is not the production capacity, so the price in the market becomes unstable, with large spikes and then resulting drops as some customers leave the market for alternatives.