RareMetal and Organizations
PPP2010Scoutassignment.docx
Resource war.pdf지난 2010년, 8월 중국과 일본사이에 영토갈등이 있었습니다. 이 과정에서 일본정부가 센가쿠열도 주변에서 조업을 하던 중국어선을 체포하여 처벌하고자 하였고, 이에 크게 분개한 중국 정부는 희토류의 대일수출을 금지해버렸습니다. 느닷없이 희토류의 공급처를 잃게 된 일본은 급히 중국어선을 풀어주었고 희토류의 대일수출도 재개되었습니다.
이번 과제는 희토류 문제를 장기적인 자원고갈과 이에 따른 자원전쟁의 시작으로 보고 그것이 기업활동에 미치는 영향을 조사한 자료 입니다. 자료조사 결과, 대부분의 광물이 이미 거의 고갈되어 있는 것으로 확인되었습니다. 앞으로 기업활동을 할때 자원고갈 문제를 어떻게 다루어야 할까요?
참고자료들 :
Resource War: Rare Metals and Economic influence
Introduction
The terminology “Rare Metals” is used relatively and uniformly for 17 chemical elements including scandium, yttrium, gold, platinum, selenium, silver and tantalum and which rarely exist on the earth but are extremely important for industries. Rare metals are not so common in excess in the earth’s shell. While some are richer than many other minerals, most rare metals are not concentrated enough to make them easily exploitable economically.[1] The scarcity of many raw materials leads to conflicts as global demand increases rapidly. An important example is the ore coltan, from which tantalum is separated for the use as material or in the electronics industry. More specifically it is used in a broad series of information and communication technology appliances such as mobile phones and notebooks.[2] High demand for raw materials has led to the creation of new structures and OECD countries no longer dominate the market and the companies located there. Instead you can find countries like China in the market, which are purchasing directly from raw material suppliers to secure their supply. Evidence also shows that local governance as well as industry-specific and company-specific characteristics plays a major role in the increase or decrease of conflicts.[3]
World demand is anticipated to rise to 180,000 tons annually by 2012 and the absolute accessibility of metals depends on their reserves and resources.[4] For some metals, the fixed accessibility of the reserve base is under 50 years, a fact that should receive special attention. Another critical issue is the one concerning prices. High prices mean low supply accompanied by high demand. You usually pay higher prices for rare things in high demand and the dramatically increasing prices indicate an expansion of demand caused by, e.g. intensified production in current product areas or that the use of the metals is presented in a new area of production. Metal prices are also subject to large fluctuations in the short and medium term.[5] Hence, these problems should be given special attention because they are rather crucial and of present interests in the discussion and production of rare metals.
These issues should be considered by managers when exploring new markets and deciding on new products. These issues could put managers in positions where they have to consider ethical issues concerning production, mainly in developing countries.
Case study: Sony
The Japanese enterprise “Sony Corporation” was founded in Tokyo in 1946. Their first product was a rice cooker, and over time the company has grown to become one of the most popular brands in the U.S.[6] Sony’s main sectors are electronics, games, entertainment and financial services, which forces the company to use a large amount of rare metals for the production. For example, they use Indium to produce LED TV.[7] China produce 97% of all the world’s rare metals, and Japan is the biggest importer for these metals. Hence Sony will be negatively affected by the political conflict between the two countries.[8] This will be discussed later in the report. The conflict can therefore lead to a major problem for the company and be fatal for the company’s survival. One consequence of China’s dominant position has now led to the fact that several countries around the world are searching for new mines containing rare earth metals. This would be the only solution for Japan to maintain its market shares (in the electronics and technology sectors). Since Sony is a highly advanced technology company, their primal strategy should be fast product development and distribution. Moving ahead of their competitors, while focusing on innovation and creativity are vastly important ingredients to success. Managers have to face the problem, and also make the employees aware of the crisis to be able to solve it. When a company is restricted by regulations by the government, the cost will also be a huge loss of production but also losses in creativity. Because of this new restriction and political problems their strategy might have to change, though they can’t continue in the same extent as before. Sony needs to find new suppliers outside of China, and they have to push the government in Japan to find alternative sources of rare earth metals. The manager also has to consider the fact about what happens when/if there will be no more of these metals. What will happen to the company then? What should the company do to find alternative resources? Will they continue producing the same products? These questions should be discussed through the whole organization, to create awareness and motivation.
Resource Shortage
Last September, 2010, there was a territorial dispute between China and Japan in Senkaku islands (Diaoyu dao). At that time, Japanese police arrested a Chinese fishing boat, which was fishing near Senkaku islands and tried to punish them by Japanese law. And that made the Chinese government burst of anger and it announced a "rare metal embargo” against Japan. [9] This situation finally ended when China won, since the Japanese government surrendered and released the Chinese fishing boat. However, although the territorial dispute is over, the Chinese government still announced that they would cut the exporting of rare metals. Currently the quantity of rare metals exported to the US and EU was around 72% last year. [10]
The Chinese government officer insisted “if we keep mining in this pace, rare metals will be exhausted in 15-20 years” and “China will reduce rare metals exporting to 30% next year.” [11] Accordingly, the price of rare metals has been increased 6 times. [12] And finally, many countries including the US and Japan, realized that rare metals are critically important and the current depletion crisis is even bigger than the oil depletion crisis. In case of the US, they are considering investigation of mines in the US to secure rare metals. [13] Currently, China has 35% of rare metals reserves and is producing 97% of the world rare metals consumption.
“If we did not have rare metals,
for example, the size of cell phone will be like as refrigerator”
- Pail. D. Weyler, geologist - [14]
The biggest problem is the fact that some of the countries are trying to weaponize rare metals, and the total deposits or rare metals for consumption are less than 10 – 15 years. Accordingly, this problem made the price of rare metals to increase rapidly and it will seriously affect the business environment. [15]
Resource Exploitation and Development Myopia
One important aspect of globalization is that resources have been used and deployed at an international level. Rare metals as strategic resources, which can be utilized in producing high-tech products and military equipment, has gained attention from all over the world. Although China is exporting 97% of the world’s rare metals consumption, it is not really profitable to China because they are exploiting resources without any consideration on recycling. After Chinese economic growth, China is now in a passive situation. First of all, the price of rare metals was too low compared to mining cost. Between 1990-2007, the quantity of sales of rare metals has increased almost 10 times, but the price has been dropped to 64% of the initial price[16]. However, mining rare metals destroys environment, which is not counted in the price. Secondly, as the Chinese economy has developed, China is gradually shifting its export goods from raw materials to value-added products. Due to the extension of the value chain, the domestic demand for rare metals increases accordingly. As China exported rare metals in cheap price, many countries stopped mining, solely depending on importing to fulfil the consumption[17]. Based on these adverse factors, China recently announced a rare metals embargo by establishing quotas and banning the sale of some products outside the country altogether. Once the export stops, it will be a terrible shock to many developed counties. For example, the Sony’s vital industries will face to a serious problem. In the US, they decide to re-open its mines which were mothballed when Chinese production was at its height. But re-opening is a costly process, both in the terms of money and time[18].
Sustainable Resource Development
Finding out a way to access to more rare metals is not an ultimate solution because of the world resource shortage. If we only emphasis on how to gain more resources, someday these resources will be exhausted. We should establish a sustainable development through international cooperation. First of all, consuming too much of natural resources without a reason should be reconsidered. Secondly, more effective rare-metals recycling technology should be developed urgently, since currently the rates of recycling rare-metals are usually 20-30%. Finally, we should find alternative resources that are recyclable.[19] Furthermore, we insist that companies have the responsibility to educate customers of urgency of situation on resource shortage and lead them to save energy. Meanwhile, we can suggest that companies need to think value-adding through transforming their major business to service based. For example, there is not only one way which is to produce new product to make profit. Renew and upgrading what customers already have also can be another way of business without spending resources.
Managerial Discussion and Conclusions
Many countries are trying to approach and solve the issues discussed through politics, using diplomatic method. In the case of Sony, they did not have a big problem from the Resource war in 2010, since the Japanese government stored rare metals for the amount of 48 days demand.[20] However, although governments are trying to deal with this problem, the reserved resource in the world is imbalanced. Accordingly, companies in countries without enough resources are confronted to take care of the problems of resource shortage themselves.
As we mentioned earlier, political cooperation between inter-countries is critically important. Collaboration between government and companies to solve the resource shortage should be considered. It is not easy to find a way to access more rare metals from abroad countries without political cooperation. Secondly, operating a globalized organization and establishing manufacturing facilities in the countries with enough resources could also be considered. Actually, it is somehow a strategic consideration to attract foreign factories to move to China when Chinese government cutting exporting rare metals.[21] As a result, one of the largest semi-conductor factories of Samsung has recently been moved to China. Thirdly, recycling and developing alternative resources is also a manager’s responsibility. Currently, Toyota is developing a method to build a vehicle without rare metals. And Hitachi is looking for alternative metal resources which can be used instead of rare metals, cooperating with Japanese government. [22] Fourthly, the business perspective should reconsider operations, which are “not spending resources” or “less spending resources”.
Resource shortage actually is the problem for all of us, not only some countries. When some people waste, finally we all will face the resource shortage altogether. As a conclusion, the resource war is a critically important issue for corporations. Managers should figure out and understand its severity and settle a strategy to be prepared for their resource-lack future. Concerning the ethical issue, managers should consider the origin of the materials used in their products to avoid getting in the position where their reputation might be damaged.
[1] Humphries, M. (2010 Sept 30) Rare Earth Elements: The Global Supply Chain
[2] Behrendt, S. Scharp, M. Erdmann, L. Kahlenborn, W. Feil, M. Dereje, C. Bleischwitz, R. Delzeit, R. (2007) Rare metals – measures and concepts for the solution of the problem of conflict-aggravating raw material extraction-the example of coltan
[3] Behrendt, S. Scharp, M. Erdmann, L. Kahlenborn, W. Feil, M. Dereje, C. Bleischwitz, R. Delzeit, R. (2007) Rare metals – measures and concepts for the solution of the problem of conflict-aggravating raw material extraction-the example of coltan
[4] Humphries, M. (2010 Sept 30) Rare Earth Elements: The Global Supply Chain
[5] Behrendt, S. Scharp, M. Erdmann, L. Kahlenborn, W. Feil, M. Dereje, C. Bleischwitz, R. Delzeit, R. (2007) Rare metals – measures and concepts for the solution of the problem of conflict-aggravating raw material extraction-the example of coltan
[6] Sony brand website: http://news.sel.sony.com/en/corporate_information/sony_brand#brandvalues
[7] Sony Website: www.sony.net/sonyinfo/
[8] http://www.voanews.com/learningenglish/home/China-Japan-Dispute-Shines-Light-on-Rare-Earth-Metals--104541629.html
[9] Lim, B. (2010, Oct 29). China Vows to Keep Supplying Rare-Earth Metals to World, South Korea Says . Retrieved from http://www.bloomberg.com/news/2010-10-29/china-vows-to-keep-supplying-rare-earth-metals-to-world-south-korea-says.html
[10] BRADSHER, K. (2010, Oct 19). China Said to Widen Its Embargo of Minerals. Retrieved from http://www.nytimes.com/2010/10/20/business/global/20rare.html?_r=2
[11] Xiaoji, Q. (2010, Nov 03). Rare earths: Rare as it is. Retrieved from http://www.chinadaily.com.cn/bizchina/2010-11/03/content_11498743.htm
[12] Cha, B. (2010, 10 28). Price of Rare Metal jumped up 6 times. Retrieved from http://www.hankyung.com/news/app/newsview.php?aid=2010102863241&nid=005&sid=0105
[13] Lee, H. (2010, 09 29). U.S. in urgent “Secure Rare Metals”. Retrieved from http://biz.chosun.com/site/data/html_dir/2010/09/28/2010092800319.html
[14] Kim, D. (n.d.). Rare Metal, resource war. Retrieved from http://media.daum.net/foreign/view.html?cateid=1046&newsid=20101002210605005&p=sbsi&RIGHT_FOR=R3
[15] Behrendt, S. (2007). Rare metals Measures and concepts for the solution of the problem of conflict-aggravating raw material extraction – the example of coltan. Institut für Zukunftsstudien und Technologiebewertung IZT Berlin, 23/07, ISSN 1862-4804
[16] manymetal. (2010, Jun 30). 专家呼吁:稀有金属行业应考虑垄断经营. Retrieved from http://www.manymetal.cn/fb/mine/8498.html
[17] manymetal. (2010, Jun 30). 专家呼吁:稀有金属行业应考虑垄断经营. Retrieved from http://www.manymetal.cn/fb/mine/8498.html
[18] Leggett, T. (2010, Oct 27). Concerns over shortage of rare metals. Retrieved from http://www.bbc.co.uk/news/business-11620933
[19] Yasushi Watanabe (2008). Rare Metals. Issue of AIST TODAY, p.3
[20] Li Xiaowei(2009) China, Japan Seek to Build Rare Metal Stockpiles as Prices Fall http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aewgacIfWRB8
[21] Hyunah(2010) Resouce War, China is smiling http://blog.naver.com/hyunah731?Redirect=Log&logNo=140095466090
[22] techeye(2010) Japan finds alternative to China's rare earth metal stranglehold http://www.techeye.net/science/japan-finds-alternative-to-chinas-rare-earth-metal-strangelehold
