Measuring The Level Of Competition For Valuable MineralsVisualCapitalist
Everybody loves a little competition.
It levels the playing field and ensures prices and products are kept affordable and available. But how do you measure and track the competitiveness of specific sectors?
The Herfindahl-Hirschman Index (HHI) is a commonly accepted measurement of market concentration, and in today’s case, we use it to show which mineral sectors have healthy competition between countries, as well as the sectors that are more monopolistic.
What is the Herfindahl-Hirschman Index?
The HHI is calculated by squaring the market share of each competitor and then summing up the resulting numbers. It can range from zero to 10,000.
The closer a market is to a monopoly, the higher the market’s concentration, and the lower its competition. If there were only one company in an industry, that company would have a 100% share of the market, and the HHI would equal 10,000, demonstrating a monopoly.
Conversely, if there were thousands of firms competing, the HHI would be near zero, indicating almost perfect competition.
- HHI below 1,500: a competitive marketplace
- HHI between 1,500 – 2,500: a moderately concentrated marketplace
- HHI of 2,500 or greater: a highly concentrated marketplace
Interestingly, the same technique is also used by the U.S. Department of Justice to look at market competition and potential anti-trust violators, as well.
Global Metal Production
Today’s chart uses data from the World Mining Congress to look at the competition for global minerals between countries. The HHI scores show the minerals most and least exposed to competition, while uncovering opportunities for countries looking to bolster their own mineral production.
Here are 33 minerals ranked, going from highest score (most monopolistic) to lowest (least monopolistic):
|Rank||Mineral||HHI Score||Type of Mineral|
|#1||Niobium (Nb2O5)||8,413||Iron and Ferro-Alloy Metals|
|#2||REE (Rare Earth Elements)||7,219||Non-Ferrous Metals|
|#3||Oil Sands||6,871||Mineral Fuels|
|#4||Tungsten (W)||6,828||Iron and Ferro-Alloy Metals|
|#5||Platinum (Pt)||5,383||Precious Metals|
|#8||Vanadium (V)||3,573||Iron and Ferro-Alloy Metals|
|#9||Coking Coal||3,423||Mineral Fuels|
|#10||Cobalt (Co)||3,184||Iron and Ferro-Alloy Metals|
The data here makes it clear that mineral production is not uniformly distributed throughout the world, giving some countries huge advantages while revealing potential supply problems down the road.
Renewables in the Spotlight
While commodities like gold and oil have robust levels of competition around the world, the renewable energy industry relies on more obscure raw materials to make solar, wind, and EVs work.
Rare earth elements (REE) rank #2 on the list with a HHI score of 7,219, while battery minerals such as graphite (#6), vanadium (#8), cobalt (#10), and lithium (#16) also appear high on the list as well.
According to a recent study, the production of rare earth elements is an area of particular concern. Used in everything from electric motors to wind turbines, rare earth demand will need to increase by twelve times by 2050 to reach emissions targets set by the Paris Agreement.
The only problem is that China currently controls 84% of global production, which increases the odds of bottlenecks and scarcity as demand rises. This ultimately creates an interesting scenario, where a sustainable future will be at the mercy of a few a producing nations.
Article by Visual Capitalist