q     From the late 1990s to the present, there have been significant changes in both supply and demand for individual rare earths. In the past year, prices for all elements except for europium (used in phosphors) have increased

q     Rechargeable NiMH batteries are the battery of choice for hybrid vehicles and the Global demand for hybrid-electric vehicles (HEVs) is expected to reach 3.9 million by 2015. If the number of NiMH batteries increased from the hybrid vehicles demand, then it could touch 20,000 metric tons of rare earth by the year 2010.

q     Chinese Export Quota for Rare Earths has been reducing from 2004 in a considerable manner. For this Year, it has been cut by 22% by the government. This could create some imbalance in Global Rare Earths Market.

q     Chinese consumption has risen from 40% to 36,000 metric tons REO (Rare Earths Oxide) in 2004 to 60% of 73,500 metric tons REO in 2007. This growth is due to a combination of production quotas, restrictions on foreign investment in the rare earths industry, export taxes and export quotas. In addition, China’s dominance over world supply which is currently 92% means it has significant influence on the future of the rare earth industry.

q     Currently the substitution for Li ion batteries is NiMH batteries are minimal. Li batteries could replace NiMH batteries in future; this may bring down the demand for rare earths from this segment.

q     Toyota’s Prius is the largest selling brand of hybrid vehicles in the world. Toyota is expected to produce 1 million hybrid vehicles in 2010. Moreover the total hybrid vehicles by the year 2012 are predicted to be around 3 million.

The U.S. House of Representatives passed landmark legislation to address the global illegal logging crisis. The law would make the United States the first country in the world to prohibit the import, sale, or trade in illegally-harvested wood and wood products.

The law made changes in the wildlife trafficking regulations, the Lacey Act, to include timber, wood products and other plants. The Environmental Investigation Agency (EIA), the leading environmental organization providing expertise to policy makers on illegal logging and associated international trade, estimates that 10% of annual wood product imports into the U.S. – worth some $3.8 billion dollars – are derived from illegally logged timber.

EIA claims that Vietnam is a hub for processing Asia’s illegal wood logs, much of which is imported to the United States as furniture. Vietnam exported 2.4 billion USD worth of wooden products last year. The agencies estimate that 500,000 cubic meters of logs move illegally from Laos to Vietnam every year. Large volumes of timber from Laos also go to China’s burgeoning wood-processing industry, researchers say. The ‘Vietnam Wood and Forestry Association’ have sent a document to EIA denying the report findings and have requested the author make corrections and publish an apology.

China is considering various measures to reduce logging of their own forests, while import’s wood from neighboring countries for growing wood-processing industries in China.

“Most logs imported into China are effectively stolen, with no payment of government royalties to exporting nations or environmental control over harvest operations. At least 80% of Chinese timber imports from Brazil, Cambodia, Cameroon, Congo-Brazzaville, Equatorial Guinea, Gabon, Indonesia, Myanmar, Papua New Guinea, and the Solomon Islands are illegal, according to recent estimates, with somewhat lower values (50 to 60%) for Malaysia and Russia,” writes Laurance. “Unprocessed logs are easy to acquire and smuggle, and corruption in the log trade is far more prevalent than that for processed forest products.

According to the World Wildlife Fund (WWF), China’s demand for imported industrial wood — timber, paper and pulp — will grow by at least 33 percent within the next five years, from the current 94 million cubic meters to 125 million cubic meters.

I believe that going forward ,international pressure will force Asian countries to be ethical in restricting illegal usage of natural resources, at least to the extent of exports to International markets. Growing awareness will encourage more certified wood usage, but limited wood supply will affect wood and wood product prices. Even the EU would extend its environmental support soon just as the US did. Imports of illegal wood products from regions like china and Vietnam will affect these regions as the percentage of illegal wood consumption is very high. China is already surrounded by several issues with respect to environment, labor, subsidies etc., these will affect china going forward as it is the leading manufacturer of paper and furniture products. A rise in timber prices has prompted some wood-producing countries, such as Indonesia, to clamp down on illegal logging.

The government agency has proposed anti-dumping duties of 17.7 percent for VSMPO-Avisma and 21.7 percent for Solikamsk. The products covered by the investigation include primary and secondary pure and alloy magnesium metal, regardless of chemistry, raw material source, form, shape or size.

Leading the anti-dumping charge has been Salt Lake City-based U.S. Magnesium Corp., the only domestic producer of primary metal. The company, along with two unions, first requested an investigation into imports from Russia and China in 2004, and in April the following year Commerce imposed anti-dumping duties of 21.71 percent on VSMPO-

Avisma and 18.65 percent on Solikamsk. If imposed, the duties could have an impact on U.S. magnesium prices and its one of the reasons why the U.S. has some of the highest magnesium costs in the world, but currently there is little of magnesium coming out of Russia and the situation is expected to be same especially if higher anti-dumping duties go into effect in September.

In 2007, VSMPO-Avisma petitioned to revise its method for reporting the cost of production. As a result of those arguments and market conditions, the anti-dumping duties were slashed to 0.41 percent for VSMPO-Avisma and 3.77 percent for Solikamsk.

Now, U.S. Magnesium has requested that the duties be reviewed for a third time. And based on its preliminary investigation, the Commerce Department is recommending that the duties be bumped back up to 17.7 percent and 21.7 percent

One of the reasons for the increase is that, with respect to VSMPO-Avisma, Commerce determined that it attempted to calculate its cost of production by treating magnesium as a by-product, distorting the true cost of producing magnesium. Commerce recalculated its cost of production by treating magnesium and chlorine as co-products.

U.S. Magnesium supports Commerce’s preliminary rejection of VSMPO-Avisma’s attempt to treat magnesium as a by-product and it also believes that Commerce properly determined that VSMPO-Avisma is selling in the U.S. market at prices below VSMPO-Avisma’s cost of production, in violation of U.S. trade law. U.S. Magnesium will continue participating fully in the review to ensure that Commerce reaches a correct final determination. Over the next several months all parties will have an opportunity to make arguments before the Commerce Department. A final ruling is expected by Sept. 2nd, 2008 if the preliminary results are adopted than U.S. Customs and Border Protection would be instructed to assess the new anti-dumping duties.

Green Procurement requires contracting companies, authorities or entities take environmental issues into account when tendering for goods or services. That is, procurement of products that have the lowest and safest impact on the environment and humans in terms of natural resources The goal is to reduce the impact of the procurement on human health and the environment. Basic examples include:

- energy efficient buildings
- environmentally friendly public transport
- recyclable paper
- organic food in canteens
- electric cars
- office equipment made of environmentally sustainable timber
- electricity stemming from renewable energy sources
- air conditioning systems complying with state-of-the-art environmental solutions
- energy efficient computers

In this context, there are some factors to consider when evaluating suppliers for environmental performance:

• What are the supplier’s environmental values and commitments? How are they stated, measured, and enforced?
• How does the company express its environmental values or commitment to employees, customers, and others?
• Does the supplier have an environmental management system?
• Who is accountable for environmental performance — environmental staff only or all employees?
• Is the company in compliance with all applicable federal, state, and local environmental laws?
• How willing is the supplier to understand and work to meet your company’s environmental specifications?
• What efforts has the supplier undertaken to design products with the environment in mind?
• What efforts have been made to efficiently use resources, materials, and energy, as well as recycle and prevent pollution, in the production and distribution of products?
• Does the supplier do anything to reclaim its products or packaging at the end of their useful lives, or encourage customers to recycle or reuse products?

Benefits from Green Purchasing

- Cost avoidance – e.g. Reduced spending towards pollution prevention, hazardous waste management etc.

- Easier compliance with environmental regulations

- Reduced liability and lower health, safety costs

- Improved worker and community health

- Improved brand, image and goodwill – positive media coverage etc.

Major companies, at their manufacturing locations have green sourcing policies and framework to ensure that their supply chain is also green.

All the major OEM’s are forced to look into their supply chains by their consumers due to the environmental exploitation by their procurement counterparts in Asian economies like china. Many companies like Nike have severed relationships with Asian companies which are not up to the standards in environmental regulations.

Green sourcing is the order of the day as consumer awareness has increased and preference towards more environment friendly products or green products have increased.

Going green means different things for different industries – the Chemical Industry focuses on ‘green chemistry’ which is a philosophy encouraging the design of products and processes that reduce or eliminate the use of hazardous substances.

Recently major electronics companies have been a target of environmental protection organizations.

Current Trends in Green Products and Green Sourcing

Many organizations start in a smaller way to make themselves green. The following is the observed sequence.

- Green Office equipment and stationary procurement.

- Increasing Energy efficiency

- Reducing carbon emissions and other emissions in non-core processes.

- Reduced use of packaging materials and recycling packaging materials.

- Use of reusable and non-disposable packaging materials.

Few organizations look into the core processes to reduce the impact of carbon emissions. These organizations reap the benefits of a new market – Green products.

Future Trends

As explained, some industries and companies such as the electronics companies are forced by the consumers to use green materials to make the core products.

But the green awareness has to go beyond the organizations to have a complete impact on the environment. The only way to do this is Green procurement. I.e. the OEM’s implementing sourcing policies that could enable their suppliers and the players throughout the supply chain to implement policies to make their suppliers implement higher energy efficient technologies, reduce overall emissions and use materials that are environment friendly and reduce the amount of waste that would be produced after the product’s life cycle.

Only 1 in 10 procurement professionals can extract critical information.

Managing spend across the supply chain would require expertise with understanding supplier strategies, competitor analysis and more importantly ,customized ( Companies today need a service that collects business and market intelligence from multiple data sources across the world and delivers only relevant and customized information) real-time and confidential information in order to ensure sustainability. Market intelligence with emerging sourcing, planning, procurement, monitoring, and analytics have become extremely crucial in effective cost control.

The emergence of procurement intelligence providers can be primarily attributed to a critical gap that had been discovered, lack of good quality research as a result of data overload. Procurement executives spend approximately 45- 50% of their time on data analysis. A procurement intelligence provider’s role hence is crucial in the sense that they provide customized research that can be instantly integrated in to the organizations strategic plans. Procurement intelligence therefore— provides a “single point of truth” for all procurement-related data, analysis and intelligence.