Chartered Financial Analyst Level 2
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- The flexibility in industrial metals life cycle is due to the ability to:
Exam-Like
A
change the amount of ore extracted.
B
store metals for long periods of time.
C
increase or decrease smelting and purification.
Explanation:
Explanation
The flexibility in industrial metals life cycle primarily comes from the ability to increase or decrease smelting and purification (Option C). Here's why:
Key Points:
- Smelting and purification are processing stages that can be adjusted relatively quickly in response to market demand
- These stages represent the transformation of raw ore into usable metal products
- Unlike mining/extraction (Option A) which requires significant capital investment and time to scale up or down
- Unlike storage (Option B) which is more about inventory management rather than production flexibility
Industrial Metals Life Cycle Stages:
- Extraction/Mining - Fixed capacity, difficult to adjust quickly
- Smelting - Can be scaled up/down based on demand
- Purification - Flexible processing capacity
- Fabrication - Manufacturing into final products
- Distribution/Storage - Inventory management
The ability to control smelting and purification rates allows producers to respond to price changes and market conditions more effectively than changing extraction rates or relying solely on storage.
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