Systemic Risk in the Lithium and Copper Value Chains: A Network-Based Analysis Using Euclidean Distance and Graph Theory

Marc Cortés Rufé (), Yihao Yu and Jordi Martí Pidelaserra
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Marc Cortés Rufé: Department of Business, Faculty of Economics and Business, University of Barcelona, 08034 Barcelona, Spain
Yihao Yu: Department of Business, Faculty of Economics and Business, University of Barcelona, 08034 Barcelona, Spain
Jordi Martí Pidelaserra: Department of Business, Faculty of Economics and Business, University of Barcelona, 08034 Barcelona, Spain

Commodities, 2025, vol. 4, issue 4, 1-30

Abstract: The global push for electrification and decarbonization has sharply increased demand for critical raw materials—especially lithium and copper—heightening financial and strategic pressures on firms that lead these supply chains. Yet, the systemic financial risks arising from inter-firm interdependencies in this sector remain largely unexplored. This article presents a novel distance-based network framework to analyze systemic risk among the world’s top 15 lithium and copper producers (2020–2024). Firms are represented through standardized vectors of profitability and risk indicators (liquidity–solvency), from which we construct a two-layer similarity network using Euclidean distances. Graph-theoretic tools—including Minimum Spanning Tree, eigenvector centrality, modularity detection, and contagion simulations—reveal the structural properties and transmission pathways of financial shocks. The results show a robust-yet-fragile topology: while stable under minor perturbations, the network is highly vulnerable to failures of central firms. These findings highlight the utility of distance-based network models in uncovering hidden fragilities in critical commodity sectors, offering actionable insights for macroprudential regulators, investors, and corporate risk managers amid growing geopolitical and financial entanglement.

Keywords: systemic risk transmission; financial similarity networks; commodity supply chains; eigenvector centrality (search for similar items in EconPapers)
JEL-codes: C0 C1 C2 C3 C4 C5 C6 C7 C8 C9 D4 E3 E6 F0 F1 F3 F4 F5 F6 G1 O1 O5 Q1 Q2 Q4 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jcommo:v:4:y:2025:i:4:p:23-:d:1764838

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