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As Rare Earths Get Rarer…

Commodities / Metals & Mining Mar 02, 2011 - 07:20 AM GMT

By: Anthony_David


China’s role in the global rare earth market needs little introduction. China’s restrictive trade policies have forced the rest of the world to rethink their own policies and explore rare earth resources in nations other than China. The governments of the US and certain European nations are trying to develop various strategies to secure their supply of rare earth metals.

Recycling and stockpiling are two options being considered as ways to hold rising prices and ease supply shortages. Urban mining is the new recycling buzzword. It involves the extraction of rare earths from e-waste. However, recycling is expensive and complex. Director General Ian Hetherington of the British Metals Recycling Association (BMRA) said, “The widespread use of these metals is a relatively recent phenomenon, and so there is not a significant amount recovered through (Waste Electrical and Electronic Equipment) recycling. Currently, recovering these materials can be costly and only produces very small quantities, making it uneconomical.” He did add that the situation could change over the next decade.

The European Commission (EC) is investing about $23 million on research to improve underground technologies and to find substitutes for rare earths. The EC hopes to improve recycling techniques and make it economically viable. Germany, Japan and the US are working on recycling technologies too. Large players such as Hitachi and Mitsubishi are working to make recycling a viable option.

China, on the other hand, plans to build a national stockpile of rare earths and that would naturally push prices upwards. China also intends to change its status from being a net exporter to a net importer of rare earth metals. Such a move is likely to further lower China’s export quota and squeeze the global supply even more.

Chen Zhanheng, director of the Chinese Society of Rare Earths said, “(There are) early signals that China is moving from sell-side to buy-side. China becomes a new market opportunity for producers outside China.”

James T. Areddy of The Wall Street Journal says, “The reports say storage facilities built in recent months in the Chinese province of Inner Mongolia can hold more than the 39,813 metric tons China exported last year… Chinese state media reports say stockpiles may eventually top 100,000 metric tons.”

The US reportedly has the world’s second largest rare earth deposits but extraction facilities are still under development. Emily Coppel, an American Security Project research assistant said, “The U.S. will need to develop new technologies and invest in mining operations to solve the long-term supply problem. In the short-term, stockpiling rare earths metals is one of the best ways to prepare for a future shortage until these new mines and technologies become available.”

Other organizations have however spoken against stockpiling and instead support research in recycling, solar power equipment, wind turbines and electric cars. Robert Jaffe, Professor at Massachusetts Institute of Technology, said, “We do not recommend economic stockpiling which we believe is a disincentive to innovation and has backfired in the past. After all, many of these elements are not even found in significant deposits in the United States so mining independence doesn’t even make sense.”

Other supply options being discussed are development of rare earth substitutes and international cooperation. Experts suggest that if nations join hands to develop new mines, they could reduce their dependence on China’s monopoly.

China’s unofficial ban on rare earth shipments to Japan last year forced the rest of the world to view China with considerable suspicion. Looking for alternate sources became a necessity. China’s neighbors Japan and South Korea have already begun stockpiling rare earth metals. In fact, South Korea plans to spend up to $15 million by 2016 to build a stockpile of about 1,200 tonnes.

In October last year, Japan’s Prime Minister Naoto Kan said, “Stockpiling is one option we need to consider. While Japan is trying to secure supplies from countries other than China, establishing those agreements may take some time.”

Efforts to undermine China’s dominance are underway in South Africa as well. Canada’s Great Western Minerals Group expects to produce about 2,700 tonnes per year of rare earth metals from its Steenkampskraal mine in South Africa. Chief executive Jim Engdahl said, “The big opportunity here that people haven’t recognized is that China will become a net importer by 2014/15. We believe South Africa will become one of the leaders in this industry outside of China.”

Japan has also expressed considerable interest in developing South Africa’s rare earth industry among other sectors.

By Anthony David

The mission of the Critical Strategic Metals Web Site

is to serve as a monthly compass for those who take a fundamental view of investment regarding the Molybdenum, Manganese and Magnesium metals markets, are concerned with the emerging critical under-supply of these strategic metals to Western nations and wish to profitability chart their course. Each month we will research and provide, in as short and concise a manner as possible, the most applicable information available on resources that will have the biggest impact on our day to day lives. Click here to sign-up for our FREE monthly report

© 2011 Copyright  Anthony David- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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