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Market Volatility Continues To Shake Up The Rare Earths Industry

Commodities / Metals & Mining Oct 03, 2011 - 01:50 AM GMT

By: Anthony_David


After two years of continuous increase, the prices of rare earth metals seem to have reached a more balanced level in recent times. The primary causes for this change is the optimistic supply scene and the possibility of China facing legal challenges because of its export restrictions. China controls almost 97% of the global market and over the years, its export restrictions and other policies have sparked panic buying, frantic searches for alternative sources and price hikes of almost ten times in certain cases. Certain companies have also begun reducing their usage of rare earth metals.

Fixing rare earth prices is not easy given the small quantities produced and very few buyers and sellers claim to have clarity about prices. Australia’s Lynas Corporation recently said that the prices of both lanthanum and cerium have dropped from the Q2 prices of $135.02 and $138.29 per kilogram respectively to $92 in mid-September. Prices of both however, are still almost 18 and 25 times higher than their respective 2009 prices. According to Bloomberg, neodymium prices have fallen as well. On the other hand, prices of some of the heavy rare earth metals such as terbium have not fallen at all.

The unpredictability of China’s policies has made the market unclear. As Edward Richardson, vice president of Indiana based Thomas & Skinner Inc. said, “Without dependable and consistent data, we are left with stories, anecdotes and perceptions.” He is probably right when he says that volatile pricing is not likely to change any time soon.

On September 20, an analyst from J.P. Morgan Chase & Co lowered his outlook for Colorado’s Molycorp Inc. citing declining rare earth prices. The announcement caused the company’s share prices to fall by 22% on that day and by another 3.9% the next day to reach $39.85. This has been its sharpest fall since its IPO in 2010. CEO Mark Smith of Molycorp said, “Although there may be some short-term fluctuations and impact related to recent speculation in China, we remain very, very bullish on the prices of these materials.”

Declining rare earth prices brought down share prices of Lynas as well. On September 28, the company’s shares fell by 13% to A$1.27. Tim Schroeders from Melbourne’s Pengana Capital Ltd. remarked, “It’s exactly the same dynamic that Molycorp’s suffering that Lynas’s share price is reflecting today.”

Earlier in the month, the EU disclosed that it was building stockpiles of rare earth metals to reduce dependency on China. Supplies are being sourced from non-EU regions such as Russia, Latin America and Africa. The stockpiling may affect rare earth prices in Q4 but prices are also expected to level out by then. CEO David O’Brock of Estonia’s Molycorp Silmet AS said, “I 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.”

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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