I didn’t intend to cover these two evolving stories again, but some announcements today caught my eye.
First of all, The New York Times reported today that China’s commerce ministry has announced it will steeply reduce exports of its rare earth metals in the early months of 2011. I’ve written before about this situation as it continues to evolve, and with this announcement, it certainly seems that manufacturers struggling with short supplies and rising prices of rare earths will continue to face a similar situation next year.
China mines more than 95 percent of the global supply of the metals, which are used in smartphones, electric cars, lightbulbs and even military hardware. In addition, the country mines 99 percent of the least common rare earths, the so-called heavy rare earths that are used in trace amounts in clean energy applications and electronics.
The problem, however, is that only one-third of the world’s rare earth reserves are found in China. To cope with its own ever-growing demand, as well as that of other countries, China has been steadily reducing export quotas of rare earths over the past several years. In fact, China’s commerce ministry has previously said that the country reserves the right to further slash rare earth exports to “protect exhaustible resources and sustainable development.”
The reduction in quotas for the early months of 2011—a 35 percent drop in tonnage from the first half of 2010—is simply the latest in that series of measures. China’s commerce ministry did state that it had not decided what the total export quotas would be for all of 2011. That may be an effort to reassure traders and users of rare earths, or it may not because the ministry typically issues a second, supplementary batch of quotas each summer.
The challenge for consumers of rare earths, of course,--as is the case with any supply chain disruption—is to identify and locate both possible surplus and alternate suppliers.
Secondly, in some pre-Christmas good news for Boeing and its supply chain, the company announced last week that it will now resume flight test activities on the 787 Dreamliner.
For anyone not following Boeing or the development of its 787 Dreamliners, the 787 is the first airliner made of composite plastics instead of the traditional aluminum. Boeing has been struggling with the new carbon-fiber materials, parts shortages, redesign work and an increased reliance on suppliers as the company outsourced production of the aircraft.
The Dreamliner’s scheduled entry into commercial service has been postponed numerous times, but was most recently planned for the first quarter of 2011. In the latest of a series of setbacks, flight testing of the 787 was suspended last month following an in-flight electrical fire on a test flight in Laredo, Texas.
Since then, engineers have redesigned part of the software for the 787’s electrical system to improve power distribution and altered the panels where the fire started.
Indeed, according to the Boeing news, Boeing and Hamilton Sundstrand engineers have completed testing of the interim software updates. Verification of the system included laboratory testing of standalone components, integration testing with other systems, flight simulator testing and ground-based testing on a flight test airplane. The company has since then installed an interim version of updated power distribution system software in the aircraft and conducted reviews to confirm the flight readiness of ZA004--the first of the six flight test airplanes that will return to flight.
Both of these stories have been interesting to follow. I look forward to hearing in 2011 how companies in both the rare earths and 787 aircraft supply chains address these challenges.