Optimum level of Republic of Korea copper stockpile using disruption risk model

Abstract

This study evaluates the adequacy of copper stockpiles managed by the Korean government and proposes an economically optimal level from a strategic perspective. The Disruption-Risk model, a methodology that aims to maximize the net benefit of stockpiling by considering potential future demand and supply disruptions, was employed in this analysis. The analysis showed that stockpiling an additional 2400 metric tons above Korea's current target is an economically optimal strategy. Moreover, the sensitivity analysis showed that it is a rational decision for the government to engage in stockpiling activities rather than the private sector. It was found that it is essential to continuously increase and maintain stockpiles in line with Korea's evolving policy direction. The findings of this study employ statistical methods based on historical disruption data, which allows for a comparison with the prevailing approach to calculating stockpiles in Korea, which is based on demand assumptions. These findings can serve as a basis for Korea's copper stockpiling policy and can be utilized to enhance resource security in preparation for possible future scenarios.