Rare Earth Prices

Rare Earth Elements are not the same as Rare Industrial Metals

Rare Earth Elements

Randy Hilarski has also released a video on this article that can be watched by clicking here.

I read articles from other writers who often refer to Rare Industrial or Technical Metals as Rare Earth elements. I would like to take some time and clear up the issue. I deal with RIM’s and REE´s on a daily basis. The two might both be considered metals but that is where the similarities end.

First we have REE´s or Rare Earth Elements. These metals consist of 17 metals, the Lanthanides plus Scandium and Yttrium on the periodic table of the elements. These metals are in a powder form, making them difficult to assay and store. One important factor that is often mentioned is that they are not rare. This is very true, but finding REE´s in large deposits is difficult.

In the mining sector REE mines are standalone mines, that focus on the mining and refining of REE´s exclusively. Currently around 97% of all REE´s are mined and refined in China. Historically REE mining and refining has been a dirty business, which has affected the environment around the mines. The elements Thorium and Uranium are often found along with the REE´s in the deposits causing the slurry to be slightly radioactive when processed. The use of highly toxic acids during the processing can also have serious environmental impact. Many companies are trying to open REE mines but they are meeting headwinds, as nations and people do not want these mines in their backyard.

Over the last few years China has dramatically cut its export of REE´s. This and the increased need for REE´s have caused a meteoric rise in the value of these metals. The one area that very few people talk about is the role of the media combined with speculators in raising the value of REE ETF´s in particular. For the last couple years REE´s were the rock stars of the metals. The news has calmed as of late, but the supply and demand factors that caused the metals to soar are still in place. Recently China closed it BaoTao mine until REE prices stabilize.

Rare Earth Metal - Indium

Rare Industrial Metals, RIM´s or Technical metals are another group entirely. The RIM´s are made up of metals used in over 80% of all products we use on a daily basis. Without these metals you would not have the world of the 21st century with our mobile phones, hybrid cars, flat screen TV´s, highly efficient solar energy and computers. Some of these metals include Indium, Tellurium, Gallium, Tantalum and Hafnium. These metals really are rare compared to the Rare Earth Metals which causes a great deal of confusion. These metals are in a metallic form, stable and easy to store and ship.

RIM´s are mined as a by-product of base or common metal mining. For example Tellurium is a by-product of Copper mining and Gallium is a by-product of Aluminum and Zinc mining. The mining of the RIM´s currently are for the most part at the mercy of the markets for the base or common metal mining. If the Copper mines of the world decide to cut production due to Copper losing value, this will have a huge impact on the amount of Tellurium that can be refined. Up until now, because of the previous small size of the RIM market, many companies do not feel the need to invest money into better technology to mine and refine these metals. The RIM´s would have to be valued much higher to gain the attention of the mining industry.

When China cut exports of REE´s they also cut exports of RIM´s. This put pressure on the value of these metals. RIM´s have increased in value, but nowhere near the meteoric rise of the REE´s. Most of the metals increased in value around 47% in 2010 and 25% so far in 2011. There is still a lot of room for growth in the value of these metals (not based on speculation like REE´s) as demand is exceeding supply now and in the future.

For Example, when REE´s and the stock market recently fell sharply the RIM´s came down slightly in value but have held their own extremely well. On a further note, according to Knut Andersen of Swiss Metal Assets, ¨Even though prices of the Rare Industrial Metals continue to go up in value, consumers will eventually only see a very small increase in the price of the end products, because there is so little of each metal used to produce these products. Also if the people can´t afford a smartphone they will still buy less expensive phones that still use the same Rare Industrial Metals¨.

The need for RIM´s has risen sharply over the years and will continue to grow at astronomical rates. China, India, South America and the whole of Africa with hundreds of millions of new consumers are now buying and using computers and mobile phones to name just a few products.

The future is bright for the technologies and the Rare Industrial Metals that make them work and for anyone who participates in stockpiling these metals now to meet future increased demand.

By: Randy Hilarski - The Rare Metals Guy

Chasing Rare Earths, Foreign Companies Expand in China

Rare Earth Elements

CHANGSHU, China — China has long used access to its giant customer base and cheap labor as bargaining chips to persuade foreign companies to open factories within the nation’s borders.

Now, corporate executives say, it is using its near monopoly on certain raw materials — in particular, scarce metals vital to products like hybrid cars, cellphones and energy-efficient light bulbs — to make it difficult for foreign high-tech manufacturers to relocate or expand factories in China. Companies that continue making their products outside the country must contend with tighter supplies and much higher prices for the materials because of steep taxes and other export controls imposed by China over the last two years.

Companies like Showa Denko and Santoku of Japan and Intematix of the United States are adding new factory capacity in China this year instead of elsewhere because they need access to the raw materials, known as rare earth metals.

“We saw the writing on the wall — we simply bought the equipment and ramped up in China to begin with,” said Mike Pugh, director of worldwide operations for Intematix, who noted that the company would have preferred to build its new factory near its Fremont, Calif., headquarters.

While seemingly obscure, China’s policy on rare earths appears to be directed by Prime Minister Wen Jiabao himself, according to Chinese officials and documents. Mr. Wen, a geologist who studied rare earths at graduate school in Beijing in the 1960s, has led at least two in-depth reviews of rare earths this year at the State Council, China’s cabinet. And during a visit to Europe last autumn, he said that little happened on rare earth policy without him.

China’s tactics on rare earths probably violate global trade rules, according to governments and business groups around the world.

A panel of the World Trade Organization, the main arbiter of international trade disputes, found last month that China broke the rules when it used virtually identical tactics to restrict access to other important industrial minerals. China’s commerce ministry announced on Wednesday that it would appeal the ruling.

No formal case has yet been brought concerning rare earths because officials from affected countries are waiting to see the final resolution of the other case, which has already lasted more than two years.

Karel De Gucht, the European Union’s trade commissioner, cited the industrial minerals decision in declaring last month that, “in the light of this result, China should ensure free and fair access to rare earth supplies.”

Shen Danyang, a spokesman for the commerce ministry, reiterated at a news conference on Wednesday in Beijing that China believed its mineral export policies complied with W.T.O. rules. China’s legal position, outlined in recent W.T.O. filings, is that its policies qualify for an exception to international trade rules that allows countries to limit exports for environmental protection and to conserve scarce supplies.

But the W.T.O. panel has already rejected this argument for the other industrial minerals, on the grounds that China was only curbing exports and not limiting supplies available for use inside the country.

China mines more than 90 percent of the world’s rare earths, and accounted for 60 percent of the world’s consumption by tonnage early this year.

But if factories continue to move to China at their current rate, China will represent 70 percent of global consumption by early next year, said Constantine Karayannopoulos, the chief executive of Neo Material Technologies, a Canadian company that is one of the largest processors in China of raw rare earths.

For the last two years, China has imposed quotas to limit exports of rare earths to about 30,000 tons a year. Before then, factories outside the country had been consuming nearly 60,000 tons a year.

China has also raised export taxes on rare earths to as much as 25 percent, on top of value-added taxes of 17 percent.

Rare earth prices have soared outside China as users have bid frantically for limited supplies. Cerium oxide, a rare earth compound used in catalysts and glass manufacturing, now costs $110,000 per metric ton outside China. That is more than four times the price inside China, and up from $3,100 two years ago, according to Asian Metal, an industry data company based in Pittsburgh.

For most industrial products that are manufactured in China using rare earths and then exported, China imposes no quotas or export taxes, and frequently no value-added taxes either.

Companies do that math, and many decide it is more cost-effective to move to China to get cheaper access to the crucial metals.

“When we export materials such as neodymium from China, we have to pay high tariffs,” said Junichi Tagaki, a spokesman for Showa Denko, which announced last month that it would sharply expand its production of neodymium-based magnetic alloys, used in everything from hybrid cars to computers, in southern China.

The company saves money by manufacturing in China instead of Japan because the alloys are not subject to any Chinese export taxes or value-added taxes, he said.

Big chemical companies are also shifting to China the first stage in their production of rare earth catalysts used by the oil industry to refine oil into gasoline, diesel and other products. They are moving after Chinese state-controlled companies grabbed one-sixth of the global market by offering sharply lower prices, mainly because of cheaper access to rare earths. Chemical companies are also working on ways to reduce the percentage of rare earths in catalysts while preserving the catalysts’ effectiveness.

Production of top-quality glass for touch-screen computers and professional-quality camera lenses, currently done mostly in Japan, is also shifting to China.

Factories are moving despite worries about the theft of trade secrets. Intematix takes elaborate precautions at a factory completed last month here in Changshu, 60 miles northwest of Shanghai, where the company manufactures the rare earth-based phosphors that make liquid-crystal displays and light-emitting diodes work. While Intematix hired Chinese scientists to perfect the industrial processes here, only three know the complete chemical formulas.

China’s timing is excellent, said Dudley Kingsnorth, a longtime rare earth industry executive and consultant in Australia. Mines being developed in the United States, Australia and elsewhere will start producing sizable quantities of rare earths in the next several years, so China seems to be using its leverage now to force companies to relocate.

“They’re making the most of it, and they’re obviously having some success,” he said.

Until Western governments and business groups and media began pointing out the W.T.O. issues, Chinese ministries and officials had repeatedly stated that the purpose of the rules was to encourage companies to move production to China. They switched to emphasizing environmental protection as the trade issues became salient.

China has stepped up enforcement this summer of mining limits and pollution standards for the rare earth industry, which has reduced supplies and pushed up prices within China, although not as much as for overseas buyers. The crackdown might help the country argue to the W.T.O. that it is limiting output for its own industries.

But other countries are likely to argue that the crackdown is temporary, and that previous crackdowns have been short-lived.

Charlene Barshefsky, the former United States trade representative who set many of the terms of China’s entry to the W.T.O. in 2001, wrote in an e-mail that one problem with the W.T.O. was that its panels did not have the power to issue injunctions,. So countries can maintain policies that may violate trade rules until a panel rules against them and any appeal has failed.

Even then, the W.T.O. can order a halt to the offending practice, but it usually cannot require restitution for past practices except in cases involving subsidies, which are not directly involved in the rare earth dispute.

To be sure, China is offering some carrots as well as sticks to persuade foreign companies to move factories to China.

Under China’s green industry policies, the municipal government of Changshu let Intematix move into a newly built, 124,000-square-foot industrial complex near a highway and pay no rent for the first three years.

Intematix pays $400 to $500 a month (2,500 to 3,000 renminbi) for skilled factory workers like Wang Yiping, the 33-year-old foreman on duty on a recent morning here. It pays $500 to $600 a month (3,000 to 3,500 renminbi) for young, college-educated chemical engineers like Yang Lidan, a 26-year-old woman who examined rare earth powders under an electron scanning microscope in a nearby lab.

It was also relatively cheap to buy the factory’s 52-foot-long blue furnaces, through which rare earth powders move on extremely slow conveyor belts while superheated to 2,800 degrees Fahrenheit. With many Chinese suppliers competing, Intematix paid one-tenth to one-fifth of American equipment prices, said Han Jiaping, the factory’s vice president of engineering.

Still, Mr. Pugh said that the company’s decision to build the factory in China was based not on costs but on reliable access to rare earths, without having to worry about quotas or export taxes.

“I think this is what the Chinese government wanted to happen,” he said.

Source: http://www.heraldtribune.com/article/20110824/ZNYT01/108243014?p=1&tc=pg&tc=ar

EU Feels Pressure of China’s Rare Earths Supply Pinch

Rare Earth Elements critical to 80% of Modern Industry

The pressure to use low-carbon technologies less damaging to the environment is hitting hard on industries using rare earths in the European Union.

European Commission’s Vice President Antonio Tajani raised the concern regarding the steady supply of rare earths, which are primary components to solar panels and energy-efficient light bulbs.

Rare earth metals are also used in common electronic gadgets like iPhones and iPads.

The site www.theengineer.co.uk cited a report by Tajani’s early this week that a separate plan must be conceived to secure the supply of rare earths and allow the smooth execution of the EC’s Strategic Energy Technology Plan.

“European companies need to have a secure, affordable and undistorted access to raw materials. This is essential for industrial competitiveness, innovation and jobs in Europe,” Tajani’s report said.

The EC has been conducting a study of the rare earths metals in pursuing the low-carbon technology indicated in the plan, which includes nuclear, solar, wind, bio-energy, carbon capture and storage and updating electricity grids.

The study, “Critical Metals in Strategic Energy Technologies,” reveals that five metals commonly used in these technologies (neodymium, dysprosium, indium, tellurium and gallium) show a high risk of shortage, according to www.rareearthassociation.org.

China’s clamping down on rare earth production has led other nations to consider their options in securing their steady supply of the metals.

The United States has been considering building its own stockpile, which some industry specialists said could also distort world prices and the supplies.

China currently holds close to 95 percent of current supply and commanded a premium price raging from 100,000 to 300,000 renminbi early this month.

To be less reliant on China for rare earths, companies like Molycorp, Lynas Corp., Alkane Resources, Globe Metals Mining, among other mining firms have embarked on mineral exploration projects to uncover more of the coveted rare earths.

Recently, the U.S. Congress considered a strategic stock pile of rare earths as they are used in a variety of applications including global positioning and guidance and control systems, according to a Congressional Research Service report.

By Christine Gaylican
Source: http://au.ibtimes.com/articles/249401/20111115/eu-feels-pressure-rare-earths-supply-pinch.htm

China’s Rare Earths Monopoly - Peril or Opportunity?

Rare Earth Elements critical to 80% of Modern Industry

September 30, 2011 (Source: Market Oracle) — The prosperity of China’s “authoritarian capitalism” is increasingly rewriting the ground-rules worldwide on the capitalist principles that have dominated the West’s economy for nearly two centuries.

Nowhere is this shadow war more between the two systems more pronounced than in the global arena of production of rare earths elements (REEs), where China currently holds a de facto monopoly, raising concerns from Washington through London to Tokyo about what China might do with its hand across the throat of high-end western technology.

In the capitalist West, as so convincingly dissected by Karl Marx, such a commanding position is a supreme and unique opportunity to squeeze the markets to maximize profits.

Except China apparently has a different agenda, poking yet another hole in Marx’s ironclad dictums about capitalism and monopolies, further refined by Lenin’s screeds after his Bolsheviks inadvertently acceded to power in 1917 in the debacle of Russia’s disastrous involvement in World War One. Far from squeezing its degenerate capitalist customers for maximum profit (and it’s relevant here to call Lenin’s dictum that if you want to hang a capitalist, he’ll sell you the rope to do it), Beijing has apparently adopted a “soft landing” approach on rare earths production, gradually constricting supplies whilst inveigling Western (and particularly Japanese) high tech companies to relocate production lines to China to ensure continued access to the essential commodities.

REEs are found in everyday products, from laptops to iPods to flat screen televisions and hybrid cars, which use more than 20 pounds of REEs per car. Other RRE uses include phosphors in television displays, PDAs, lasers, green engine technology, fiber optics, magnets, catalytic converters, fluorescent lamps, rechargeable batteries, magnetic refrigeration, wind turbines, and, of most interest to the Pentagon, strategic military weaponry, including cruise missiles.

Technology transfer is the essential overlooked component in China’s economic rise, and Beijing played Western greed on the subject like a Stradivarius, promising future access to China’s massive market in return, an opium dream that rarely occurred for most companies. You want unimpeded access to Chinese RREs? Fine – relocate a portion on your production lines here, or…

Which brings us back to today’s topic.

Rare earths and investment – where to go?

China is riding a profitable wave, which depending on what figures you read, produces 95-97 percent of current global supply, and unprocessed raw earth earths ores are currently going for more than $100,000 a ton, or $50 a pound, which some of the exotica fetching far more (niobium prices has increase an astounding 1,000 percent over the last year). Rare earth elements like dysprosium, terbium and europium come mainly from southern China.

According to a United States Energy Department report, dysprosium, crucial for clean energy products rose to $132 a pound in 2010 from $6.50 a pound in 2003.

The soaring prices however have also invigorated many countries and producers to begin looking in their own back yards, for both new deposits and former mining sites that were shuttered when production cost made them uneconomic before prices went through the ceiling.

However, a number of unknown factors play into developing alternative sources to current Chinese RRE production. These include first prospecting possible sites, secondly, their purity and third, initial production costs, where modest Chinese labor costs are a clear factor.

The 17 RRE elements on the Periodic Table are actually not rare, with the two least abundant of the group 200 times more abundant than gold. They are, however, hard to find in large enough concentrations to support costs of extraction, and are frequently found in conjunction with radioactive thorium, leading to significant waste problems.

At hearings last week before U.S. House of Representatives Committee on Foreign Affairs Subcommittee on Asia and the Pacific, Molycorp, Inc. President and Chief Executive Officer Mark A. Smith stated that his company was positioned to fulfill American rare earth needs, currently estimated at 15,000-18,000 tons per year, by the end of 2012 if it can ramp up production at its Mountain Pass, California facility.

Which brings us back to foreign producers. A year ago Molycorp announced that it was reopening its former RRE mine in Mountain Pass, Calif., which years ago used to be the world’s main mine for rare earth elements, filing with the SEC for an initial public offering to help raise the nearly $500 million needed to reopen and expand the mine. Low prices caused by Chinese competition caused the Mountain Pass mine to be shuttered in 2002.

Mountain Pass was discovered in 1949 by uranium prospectors who noticed radioactivity and its output dominated rare earth element production through the 1980s; Mountain Pass Europium made the world’s first color televisions possible.

Molycorp plans to increase its capacity to mine and refine neodymium for rare earth magnets, which are extremely lightweight and are used in many high-tech applications and intends to resume production of lower-value rare earth elements like cerium, used in industrial processes like polishing glass and water filtration.

In one of those historic economic ironies, China was able to increase its RRE production in the 1980s by initially hiring American advisers who formerly worked at Mountain Pass.

The record-high REE prices are also underwriting exploration activities worldwide by more than six dozen other companies in the United States, Canada, South Africa, Malaysia and Central Asia to open new RRE mines, but with each start-up typically raising $10 million to $30 million, not all will succeed. That said, the future is bright, as almost two-thirds of the world’s supply of REEs exists outside of China and accordingly, China’s current monopoly of REE production will not last.

So where do investors look to cash in on the RRE boom?

First, do your homework.

Exhibit A is Moylcorp, which would seem to be in unassailable position as regards U.S. production, but which nevertheless on 20 September after JPMorgan Chase & Co. lowered its rating of the company, citing declines in rare-earth prices, causing its stock to plummet 22 percent in New York Stock Exchange composite trading, despite being the best-performing U.S. IPO in 2010 after beginning trading in July, more than tripling after rare-earth prices soared as China cut export quotas.

Is there money to be made in RREs?

Undoubtedly – but the homework for the canny investor needs to extend beyond spreadsheets to geopolitics, mining lore, chemistry and Wall Street puffery. That said, it seems likely that whatever U.S.-based company can cover the Pentagon’s RRE requirements is likely to see more than a minor boost in its bottom line.

Gentlemen, place your bets – but do your homework first.

Rare Earth Q4 Outlook

It’€™s a familiar story for rare earth market watchers,€“ sky-high prices and tight supply outside of China.

But until significant production outside of China is established, analysts foresee few changes to this trend,€“ barring end users shutting up shop to cut demand.

2011 has thus far seen prices for most rare earth elements take off in the wake of tight control from over production and export quotas. Total production in China for 2011 has been capped at 93,800 tonnes , an increase of 5 percent from 2010, while exports have been restricted to 30,184 tonnes,slightly less than the 30,258 tonnes permitted last year.

Although Lynas Corporation Ltd . (ASX:LYC ) officially opened their Mount Weld mine in Western Australia on August 4th , production from this facility, which will initially be 11,000 tonnes per year, is not likely to make an impact on the REE market until 2012, as the first feed of rare earths concentrate into the yet-to-be-fully-licensed Lynas Advanced Materials Plant (LAMP) in Malaysia is scheduled for Q4 .

In the meantime, Molycorp Inc . (NYSE:MCP) remain the only major producer filling the gap outside of China, and the Colorado-based company has profited nicely from the comparatively modest amount of supply it has been able to pump into REE markets so far this year.

Last month Molycorp’€™s reported production results of 815 metric tonnes of rare earth oxides for Q2, and also announced that they expected output of 977-1,321 metric tonnes during Q3, and 1,017-1,377 metric tonnes for Q4.

Coupled with the sky-high prices most REE are currently fetching, the anticipated increase in output from Molycorp has left some analysts quite bullish on the company’€™s performance outlook for the remainder of the year.

Prices may climb further still as China halts production at 3 mines

One twist that may still play a major role in REE markets before the year is out is the halt in production announced by the Chinese government on Monday .

State media reported that production has been ordered suspended by year’s end at 3 out of 8 mines in Ganzhou, Jiangxi Province. The Ganzhou region produces nearly 40 percent of China’€™s rare earths.

Li Guoqing , Director of the Ganzhou City Mining Management Bureau, commented on Monday that it was unknown when production at the 3 mines would resume, and that an eventual resumption of operations would be based on directives from the provincial government.

Although the shutdown is mostly a consequence of China hitting its annual production quota too early and the government clamping down on illegal mining and exports, it is unlikely to have an impact on the 15,000 tonnes of rare earths slated to be exported from China over the last half of the year. The prospect of a prolonged shutdown in one of China’€™s key mining regions may well begin to ripple through REE markets during Q4.

EU reveals it is stockpiling rare earths to reduce dependence on China

Another development that could play out on REE markets over Q4 was the disclosure by the European Union (EU) on Tuesday that they are stockpiling rare earths to reduce their dependence on China.

Speaking to Reuters , Andrea Maresi, press officer for EU industry minister Antonio Tajani confirmed that they were “€œworking to secure supplies of these minerals from outside of the EU, such as from Latin America, or from Africa or other countries like Russia.”€

“€œWe are trying to improve our sourcing and reduce our dependence on China”€, he added.

David O’Brock , CEO of Molycorp’€™s majority owned Molycorp Silmet AS in Estonia, revealed to Reuters in a recent interview that he had been approached by the EU about stockpiling, and had advocated stockpiling at least 3,000 tonnes of rare earth carbonate.

In spite of his conviction that the EU should be stockpiling to offset export restrictions from China, however, O’€™Brock believes REE prices will level-out in Q4.

“€œI think that prices have already started to stabilize. And consumers have found their upper boundaries that they can pass on to their customers, unless the Chinese suddenly open the flood gates, I don’€™t see prices dropping and I don’t see a continued climb in the prices,”€ he said.

By Robert Sullivan
Rare Earth Investing News

Rare earth metals and elements may affect future global relations China

Jim Sims, from Molycorp, says China is starting to export fewer rare earth elements than previously

 Wars have been fought over oil and water. But are the future global tensions going to be over access to Scandium, Neodymium or Dysprosium?

 Or could conflicts be fought over any other of the 17 rare earth elements, which, week by week, are becoming more and more important in developing the latest high-tech products?

Tucked onto the periodic table of the elements, in a little section once ignored by chemistry teachers, rare earths are now everywhere.

They are in your iPod or tablet computer, are vital for the red colour in your TV screen whatever make you have and allow your headphones to be small enough to fit into your ears.

Jim Sims
As China’s exports are being restricted, we are looking at outright shortages of rare earths, probably this year and next.

 Jim Sims Molycorp representative
They are in hybrid cars - both in the batteries and the fuel - and in new generation wind turbines, missile defence systems, solar panels and even F-16 fighter jets.

At the moment China provides 97% of the world’s rare earth elements, which is making America nervous from both an economic and a security perspective.

Their price has gone up 1000% in just a year, which is making mining them in the US worthwhile once again.

‘Rare earth shortages’

A deep hole in the ground high up in the Mojave Desert is America’s only rare earths mine, and the race is on to dig out the supply to match the demand as only a few places in the world have enough reserves to make mining them practical.

“The world - America, Britain, everyone - relies on what China exports to meet their needs,” says Jim Sims from Molycorp, the company running California’s Mountain Pass mine.

“As China’s exports are being restricted, we are looking at outright shortages of rare earths, probably this year and next,” he adds.

America’s only rare earths mine is located in the Mojave Desert in the US south-west

So the huge diggers and trucks moving vast volumes of rocks around, the daily explosive charges blasting the mountainside apart, are harvesting one of the world’s biggest deposits.

The mine closed down 10 years ago when a flood of cheap Chinese rare earth elements made profits hard to maintain.

Until just a few weeks ago, Molycorp was asking for the US government’s help to cover costs of digging these elements out, separating them off and moulding them into metal alloys.

But the price has gone up so rapidly, rare earths is suddenly looking like a good business.

Last year China’s exports of rare earth elements to Japan were interrupted during a political row over territorial waters, which sent shudders around the world.

“We should be worried when any country completely dominates any raw material supplies,” says Christine Parthemore, from the Center for New American Security in Washington DC.

“I don’t think China is uniquely at fault in this situation, but they are using the political leverage that’s derived from cornering the market they have as any country would.

“I’m sure America would do the same,” he adds.

Increasing demand

The creation of permanent magnets, a key component in so many green technologies, is one of the key uses of rare earths.

They make the new generation of wind turbines more efficient and reliable. But there are such an increasing variety of uses for these elements, down to glass polishing, that there aren’t enough of the raw materials to go around.

The speed of China’s growth means the country is consuming more of its own rare earths, which has led to a drop in the amount available for export.

“It is a security issue strictly in the sense that these minerals are used in critical military components for their properties, which we don’t currently have substitutes for,” says Christine Parthemore.

“If the prices go way up or there are actual supply shortages, it can drive prices up over the long term on military procurement - or it can mean there are parts that we can’t manufacture here in the United States anymore.”

It increases the need for an industry to extract the ore and process the materials.

“The elements are all mixed together in the ore we mine,” Jim Sims says.

“We turn them into a liquid, and let these elements settle out into oxides which are like powders,” he adds.

Inside a warehouse at the mine are dozens of huge white sacks, each weighing a metric tonne and each worth $200,000 (£125,700).

“Those powders then get turned into metals as magnets or used in their oxide forms for a variety of uses in a variety of different substances,” Mr Sims says.

As new uses are found for materials like rare earth elements, there will be more competition, and access to them may change the shape of global politics.

By Alastair Leithead BBC News, Mojave Desert, US July 12, 2011

Rare Earth Metals to Rise

Yesterday was by far the most hectic day I’€™ve had since coming onboard RareMetalBlog. In the AM, for a time, everything was quiet and relaxed. Not in a serene ‘sink into a warm bath with a glass of Glen Rothes€™ way, but in an eerily relaxed, something’€™s about to go wrong manner. Perhaps nervous energy is clairvoyant.

Then the phone started to ring. And ring. People justifiably excited, curious, concerned. The Shin-Etsu release outlining their drastically rising rare earth prices, which my colleague Robin Bromby already discussed here, seemed to be just the beginning. Movement in the majority of rare earth stocks, the big Molycorp sell, China’€™s consolidating 35 REE companies in Inner Mongolia under Baotou. These would have all been justifiably large points of interest in and of themselves.

But they weren’€™t what everyone was focussing on. Or, rather, they weren’€™t people’€™s primary focus. Reports of rare earth prices in China raising by 50%, 90%, 125%, all in the course of Tuesday evening, were what everyone was talking about. 500$+ raises in Dysprosium kg prices, within a couple of hours, were bandied about.

Unsurprisingly, I spent almost all of yesterday on the telephone, and well into the evening (bloody time zones). I spoke with analysts in Tokyo, someone from the US Department of Energy, CEOs, a fellow at the Royal Institute of International Affairs (Chatham House) in London, renowned REE specialists. I even stayed up until the wee hours and rang a few connections from Beijing.

Using a typical supply and demand Smithian economic model, the most natural assumption for drastically raising prices is an influx in demand. However, Chinese REE market experts I spoke with told me that trading volumes have been low (with the caveat that separation plants seem almost loath to sell anything).

Opinions differed greatly, but, in the end, it seems to boil down to this.

The Molycorp share sale announcement, with insiders reportedly selling up to 24% of outstanding shares (referred to in the aforelinked article as “€œan abandonment” by Byron Capital Markets analyst Jon Hykawy) was responsible for the slight dip in share prices in many rare earth companies, which has already stabilised and corrected itself. No great surprises there. A major player in any field has a serious selloff thrust upon itself, and, for a couple of hours at least, the bulls start screaming bear. This frequently wanes quickly, after an Advil (or a Red Bull) and a quick look at why they were bull on the market in the first place. This was no exception.

The much more interesting aspect of all of yesterdays news was the spectacular price increases, and the Baotou consolidation. The Chinese Ministry for Information and Technology’€™s statement yesterday that they had consolidated, restructured, or closed down 35 REE companies, giving Baotou Steel Rare Earth Group a monopoly on Inner Mongolian rare earths.

This has been anticipated for some time, and a similar move with the companies in the south would also not come out of left field.

The consolidation, and the price increases, are in no way autonomous events. To be honest, the word communique© springs to mind. China is lightyears ahead in the REE space, and they’€™re well aware of it. Sun Tzu wrote: “€œOne hundred victories in one hundred battles is not the most skillful. Seizing the enemy without fighting is the most skillful”,€ and here one can see the associative application.

It’€™s a demonstration of strength, to be sure, but also a suggestion. China wants foreign REE companies to work with them. Open offices and plants in the Middle Kingdom, give credence to Baotou’€™s newly approved Rare Earths Product Exchange, and generally feed into the world’€™s quickest growing economy.

This is going to be quite the summer. Best check to make sure my subscriptions to the People’s Daily and the SCMP are up to date. Seems I’€™ll be needing them.

Thursday, June 09, 2011
by Byron Hawes