NEW WORKING PAPER: 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.
You are welcome to download, share, or comment on the following working paper:
- Saadaoui, J., Russell, S., Vespignani, J. & Yitian, W. (2026). Use-specific Storage Premia and Market Stabilization for Critical Minerals in the Presence of Geopolitical Risk (March 4, 2026). Available at SSRN: 6217320.