Stock-and-flow simulation of R1 (dominance reinforcer) vs B1 (price correction, 3–7 yr delay) vs B2 (substitution escape, 5–12 yr delay). Adjust parameters to see how delay structure determines whether the system overshoots or corrects in time.
Material scarcity accumulates like water in a tank. Inflow: export control enforcement rate × severity — this grows non-linearly as China escalates (R1 loop). Outflow: Western refining capacity additions, which only appear after B1's 3–7 year delay.
The key insight: the stock can remain elevated for years after the initial trigger because the outflow is structurally slower than the inflow. This is not a market failure — it is a delay structure.
R1 (dominance reinforcer) compounds each period. B1 (price correction) fires once after a fixed delay. In the first B1-delay years, R1 runs unchecked. By the time B1 activates, scarcity has typically peaked 30–60% higher than it would have without the delay.
The investor implication: enter long positions at the start of R1 activation (when export controls are imposed). Exit when B1 shows early capacity inflection — typically 2–3 years before peak scarcity when capacity announcements begin to convert to output.
| Material | B1 delay (refining build) | B2 delay (substitution) | Confidence | Current status |
|---|---|---|---|---|
| Gallium | 4–6 yr | 7–12 yr (Ga₂O₃) | ≥90% | R1 active; B1 not yet fired |
| REE refining | 5–8 yr | 8–12 yr | ≥90% | R1 active; B1 early stage |
| Tungsten | 3–5 yr | 6–10 yr (Mo substitution) | ≥90% | R1 active; B1 beginning |
| Helium | 2–4 yr (recycling) | N/A (no synthetic substitute) | ≥90% | R1 active (Ras Laffan 2026) |
| PFAS | 2–4 yr (alt. chemistry) | 3–6 yr (full alt.) | 75% | Transition forced by 3M exit |