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Use-Specific Storage Premia and Market Stabilization for Critical Minerals in the Presence of Geopolitical Risk

Author

Listed:
  • Saadaoui, Jamel
  • Smyth, Russell
  • Vespignani, Joaquin L.
  • Wang, Yitian

Abstract

This paper examines how geopolitical risk affects metal prices and stockpiling when demand is unevenly distributed across end uses. We develop a Theory of Use-Specific Storage Premia, which posits that demand concentration and limited redeployability raise effective storage costs and weaken the stabilizing role of inventories/stockpiling. Using deterioration in United States–China political relations as a shock to forward-looking demand expectations, we estimate price and inventory responses for metals with well-established markets. Broad-use metals exhibit significant price declines and precautionary stockpiling following geopolitical deterioration, while use-specific metals display muted responses. Cross-sectional evidence links these patterns directly to use-specificity. The results imply that traditional stockpiling is structurally less effective for battery-linked critical minerals subject to geopolitical risk.

Suggested Citation

  • Saadaoui, Jamel & Smyth, Russell & Vespignani, Joaquin L. & Wang, Yitian, 2026. "Use-Specific Storage Premia and Market Stabilization for Critical Minerals in the Presence of Geopolitical Risk," MPRA Paper 128022, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:128022
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    JEL classification:

    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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