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Sci Adv. 2015 Nov 13;1(10):e1500522. doi: 10.1126/sciadv.1500522. eCollection 2015 Nov.

Systemic trade risk of critical resources.

Author information

1
Section for Science of Complex Systems, Medical University of Vienna, Spitalgasse 23, Vienna A-1090, Austria.
2
International Institute for Applied Systems Analysis, Schlossplatz 1, Laxenburg A 2361, Austria.
3
Section for Science of Complex Systems, Medical University of Vienna, Spitalgasse 23, Vienna A-1090, Austria. ; International Institute for Applied Systems Analysis, Schlossplatz 1, Laxenburg A 2361, Austria. ; Santa Fe Institute, 1399 Hyde Park Road, Santa Fe, NM 87501, USA.

Abstract

In the wake of the 2008 financial crisis, the role of strongly interconnected markets in causing systemic instability has been increasingly acknowledged. Trade networks of commodities are susceptible to cascades of supply shocks that increase systemic trade risks and pose a threat to geopolitical stability. We show that supply risk, scarcity, and price volatility of nonfuel mineral resources are intricately connected with the structure of the worldwide trade networks spanned by these resources. At the global level, we demonstrate that the scarcity of a resource is closely related to the susceptibility of the trade network with respect to cascading shocks. At the regional level, we find that, to some extent, region-specific price volatility and supply risk can be understood by centrality measures that capture systemic trade risk. The resources associated with the highest systemic trade risk indicators are often those that are produced as by-products of major metals. We identify significant strategic shortcomings in the management of systemic trade risk, in particular in the European Union.

KEYWORDS:

critical resources; network effects; non-fuel mineral resources; systemic risk; trade risk

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