Abstract
Substitution is an important response for material users when faced with disruption to the availability or price of an essential material. In economic terms, substitution refers to the ability of firms to alter their patterns of material use in response to exogenous market shocks. Substitution comes in different forms which vary from situation to situation. This paper uses expert opinion to identify the specific forms of substitution that occurred in permanent magnets, specifically neodymium–iron–boron magnets, following the significant increase in rare earth prices in 2010–2011. The paper provides a framework for understanding the multifaceted nature of substitution and assesses the relative importance of five different types of substitution. Technology-for-element, grade-for-grade, and system-for-system substitution appear to have been more important than element-for-element and magnet-for-magnet substitution. Cost pass-through and absorption were also important responses.
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