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Specialty Consulting:

The Emergence of Commodity Security as a Global Issue

Two recent "metal monsters" hit the Northern California area. One in San Francisco involved the theft of a two-and-a-half ton copper bell from a cathedral over a weekend and the other involved the theft of large chunks of gold from the county courthouse's $3-million historical collection. Neither incident stands alone since precious metal theft has become one of the fastest growing crimes plaguing businesses, cities, and towns across America. With gold at roughly $1,700+/ounce, copper at $8,400+/ton, silver at $34+/ounce and tin at $24,225+/ton, commodities have exploded in price. But the problem is much, much bigger.

As The World Economic Forum recently reported, one of the "Five Global Risks to Watch" is global resource or commodity security. Characterized recently by extreme volatility and sustained price increases over the long run, particularly in energy and commodity prices, the world's global commodity supply is no longer able to keep up with demand, introducing a host of security issues from mining to manufacturing to end user market availability and possession/use.

Mining: The mining industry's complex operating environments are driven by the need to maximize productivity at the lowest possible cost. Operational continuity and risk management along with management of health and safety, visitors and contractors, and general security factor heavily in day to day operations. The problem is exacerbated by the fact that much of the commodity mining across the globe takes place in developing nations.

Security convergence in mining is typically achieved in these tough operating environments through automated Security Management Systems (SMS) containing identity analytics where compliance is combined with operational and regulatory policy through an automation process that ensures people are competent, safe and accountable as they move around on site. This convergence provides a high degree of control and certainty by ensuring the right people (who are inducted, trained, licensed and competent and therefore compliant with regulations) with the right assets (e.g. vehicles or safety equipment), are in the right place at the right time, and by alerting one of exceptions.

The real growth market in commodities, and the reasons for this sustained volatility and professional security concern, is in the manufacture of modern electronics -- computer CPUs, card edge connectors, and USB cables -- and this is just for the use of gold. There's lead and tin in circuit boards and solder, copper in wiring and integrated circuits, lithium in rechargeable batteries, and nickel and iron in the structural components and bodies of most computers, televisions, and cell phones. Such demand for these metals naturally drives their rapid extraction and consumption -- as we hurtle toward the new age of paperless publication and the swift rise of the electronic reader.

Manufacturing: The core security issue in commodities, apart from mining, storage and distribution, is the use of certain precious metals in manufacturing where security of the raw materials becomes an issue prior to the manufacture and subsequently in the form of scrap metal sales. In one recent example, a company was required by the government to use titanium ($18+/lb.) vs. aluminum ($1+/lb.) to produce aircraft struts because of the landing stress of aircraft carriers vs. land where the aluminum could be used. Approximately 40% of the strut manufacture ended up on the floor representing a sizeable amount of titanium that had to be secured before being sold by the company for scrap. Organized criminal groups in the area were aware of the titanium spillage and storage locally and they subsequently tried to commit a nighttime theft.

Rare Earths: To add to this dilemma, China currently produces and controls 97% of the global supply of rare earths, those seventeen (17) essential rare elements used daily in a variety of manufacturing processes for modern electronics. China has instituted controversial export quotas on "light" and "heavy" rare earths causing world shortages of critical "heavy" rare earths. Gold is just one of the commodities required for manufacturing CPUs and USB cables. Then there's lead and tin used in circuit boards, copper in wiring and integrated circuits, lithium in rechargeable batteries, and nickel and iron in most computers, televisions, and cell phones. But the rare earths are crucial for everything from wind turbines to fluorescent lighting to iPhones and military radar systems. Beijing's control over these elements has created a global security concern, particularly in Japan and the United States both of which rely on a steady supply of rare earths from China to support continued manufacturing. Much of the Chinese quota system is Beijing's reaction to rampant pollution, the presence of illegal mines, and internal smuggling. As the quota system continues, these types of illicit operations are likely to continue to grow.

Commodity or resource security therefore takes many forms, from mining, to storage and distribution, to manufacturing and offloading/use. PRISM Security addresses the critical security issues and strategies associated with all aspects of one of the world's fastest-growing security problems.

 

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Updated February 3, 2015

 
   
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