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Posted by Mark Halper

Molycorp crushes rare earth ore in California. The market has crushed Molycorp’s stock price since the company started operations in early 2012. Industrial outfits including Siemens, Nissan and Hyundai are rumoured to be interested in acquiring it.

What do you do when you’re China and the rest of the world is so annoyed with your stranglehold on rare earth metals that it files an unfair practices complaint through the World Trade Organisation?

You tighten export restrictions on the metals, making it even harder for overseas countries to get a hold of them!

That’s what seems to have happened over the quiet of the Christmas holiday break.

“China, the world’s biggest rare-earths supplier, cut the first-batch export quota for next year by 27 percent as overseas demand for the elements waned,” Bloomberg News reported via the Taipei Times on Dec. 29.

China’s Ministry of Commerce establishes two tranches of rare earth export quotas per year. It set 2013’s first batch at 15,501 tonnes, down from 21,226 for the first allotment in 2012.

SUBJECT TO CHANGE

It could increase export levels when it determines a second round, as it did last August, when an allowance of 9,700 tonnes brought the full year limit to a three-year high of 30,996 tonnes, Bloomberg noted. That increase came soon after the WTO agreed to investigate a complaint by the U.S., the European Union and Japan against China’s rare earth export restrictions and tariffs.

Rare earth metals are vital to the economy. Manufacturers build them into everything from missiles to cars to wind turbines to smartphones, just to name a few common items.

Minerals that contain rare earth elements can also contain thorium and uranium, which is one reason we’re interested in rare earths here at the Weinberg Foundation.

As we’ve noted, policies and practices surrounding rare earth mining and availability have a direct bearing on the availability of thorium, and vice versa. Thorium is the radioactive element that could potentially serve as a more effective and safer nuclear fuel than uranium. They can also affect uranium supply.

China controls some 95 percent of the market for rare earths.

DEMAND DOWN

It’s interesting to note that, as Bloomberg implied, waning demand for the elements led China to its export limitation. The implication is that by curtailing supply, and applying the fundamentals of supply and demand, China can reverse a considerable 2012 slide in prices.

Demand has slowed amid the global economic doldrums. Also, countries are starting to find ways around their reliance on Chinese supply.

At any rate, 2013 is shaping up as some sort of pivotal year for the rare earth industry. A lively final few months  of 2012 has helped set the stage for that:

  • Greenland, which some experts say has the second largest known reserves of rare earths in the world, could relax restrictions that prevent mining them. It depends on the outcome of parliamentary elections this year. Greenland’s rare earths co-exist with uranium.
  • Australian mining company Lynas opened a rare earth processing plant in Malaysia, only to have cabinet ministers threaten to shut it down over concerns about radioactive thorium that occurs with the rare earths.
  • Molycorp, the U.S. company that re-entered the rare earth business last February, has fared so poorly amid plunging prices  that its stock has plummeted, putting it up for possible acquisition. Siemens, Nissan and Hyundai are rumoured to be interested, ProEdgeWire reports. This echoes Toyota’s buy-in to Canada’s Metamac, as manufactures seek greater control of their vital supplies.
  • Molycorp’s CEO Mark Smith resigned.
  • A UK company, Rare Earth Metal Exchange Ltd., collapsed into liquidation, less than a year after launching, according to the Daily Mirror.

Exactly how the year swings for rare earths is difficult to assess, but expect plenty more action.

One industry observer cynically suggested to me a couple months ago that China has allowed prices to decline in order to undermine the stability of market entrants who have paid considerable sums to start up operations and who need a certain price floor to stay alive.

He might have been right.

Photo from Molycorp website via CBS SmartPlanet.

Comments

  1. Martin Kral says:

    It’s time to implement Jim Kennedy’s ‘Thorium Bank’ safety deposit program. That, along with some legislation could see some rare earth mining in the US this year.

  2. Melissa Mance says:

    I Have been convinced for some time that nuclear energy is the best solution for our energy needs, Thorium sounds like an excellent source of fuel now that more is know
    about it and the various processes we have studied so far. It seems like a real solution
    for our future needs. We need to prepare for the future.

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