Commodity Supply Chain Risks: Analysis of Sectors Most Vulnerable to Disruptions

October 2022

The report examines key factors in supply chain risks in metals, energy and agricultural commodities. Production, market supply concentration and political risks analysis can help to better identify potential risks and prepare for potential disruptions. The briefing also identifies key industrial sectors and countries that are most vulnerable to commodity supply disruptions.

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Key findings

Commodity price shocks contribute to rising manufacturing costs

In 2021, global B2B and government sectors spent USD10.8 trillion to purchase agricultural, energy and mined commodities. Increases in commodity prices in 2022 significantly contributed to increased manufacturing costs and added to the global inflationary pressures.

Production concentration of commodities has increased

Production concentration increased for a large number of commodities over 2017-2021. This was in large part driven by rising demand for commodities in Asia and growth in commodities production, as Asian countries rushed to satisfy expanding domestic demand.

Market supply concentration forecast to increase

Market supply concentration for several critical commodities increased over 2017-2021. Shifts to green energy and consequent growing demand for metals, rising geopolitical risks and the absence of alternative supplies are forecast to increase the supply risks in the medium term.

Production and supply of metals is the most concentrated

Production and supply concentration of metals is the highest among the analysed commodities, largely due to the dominance of Asian countries. The absence of metal deposits in other regions, growing B2B demand in Asia and long mining project planning cycles contribute to the high concentration in the sector.

Climate change poses the biggest threat to agricultural commodities supplies

Climate change is the main risk factor that could affect supplies of agricultural commodities. Lack of diversification in the food sector and high reliance on commodities such as soybeans further increase the supply risks.

Scope
Key findings
Increased supply risks encourage supply chain diversification
Commodity price shocks require a better understanding of supply networks
Commodity supply disruptions contribute to global inflation surge
Key factors influencing commodity supply risks
Methodology used to measure commodity supply risks
Production of metals used in green energy transition is the most concentrated
Availability of bauxite deposits shapes aluminium supply
China’s dominance in the cobalt industry threatens battery industry’s supply chains
Graphite supply heavily concentrated due to China’s dominance
Long mining project cycles prevent faster diversification of lithium supplies
Rising geopolitical risks encourage magnesium production diversification
Political risks put pressure on the global nickel supply
Factors driving concentration in the metals and mining industry
Metal supply disruptions would impact hi-tech goods, construction and automotive sectors
Metals supply problems would largely affect Asian and European countries
Supply of energy commodities remains diversified
Changes in demand structure led to higher supply concentration of coal
Political risks remain among the key challenges for stable oil supply
Political risks and infrastructure constraints put pressure on natural gas supply
Factors driving concentration in the energy commodities industry
Transportation and chemicals sectors face the highest energy supply risks
Countries with large chemical products industry are vulnerable to energy supply risks
Supply of key agricultural commodities is concentrated
Natural conditions shape the supply of palm oil
Climate change poses biggest threat to the global supply of rice
Global soybeans supply largely relies on production in Brazil and the US
Natural conditions restrict sugar cane supply diversification
War in Ukraine challenges global supply of sunflower oil
Factors driving concentration in the agricultural commodities industry
Food sector is the most sensitive to agricultural commodity supply disruptions
Low income countries with high food imports share are the most affected by supply risks
Production of commodities is forecast to remain concentrated
Steps for companies to reduce commodity supply risks
Methodology of the HHI
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