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

Saadaoui, Jamel and Smyth, Russell and Vespignani, Joaquin L. and Wang, Yitian (2026): Use-Specific Storage Premia and Market Stabilization for Critical Minerals in the Presence of Geopolitical Risk.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Geopolitical risk; Critical minerals; Inventory and stockpiling; Energy transition; Commodity prices; Use-specific demand
• Subjects: F - International Economics > F5 - International Relations, National Security, and International Political Economy > F52 - National Security ; Economic Nationalism; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q31 - Demand and Supply ; Prices; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q41 - Demand and Supply ; Prices

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