Rare Earth Oxide Prices Continue Slide, But For How Much Longer? – Part Two

by Stuart Burns on

Continued from Part One.

But the fall-off in rare earth metals demand is not as marked as the drop in apparent demand suggests.

A significant portion of last year’s buying can be attributed to consumers seeking to build inventories and/or sign up supply agreements as prices rose. With supplies secured and inventories full, buyers can afford to hold back and watch prices fall, especially as global demand is weakening as economic recovery slows. Indeed, some speculative stocks have been dumped back into the market as prices have slid, adding additional downward pressure on prices.

China has tried to support prices by exporting even less than the allowed quotas. Exports are down 65 percent this year to 11,000 tons for the first nine months of 2011, accounting for only 40 percent of the quota, compared to 50,000 tons in 2008.

Therein lie the seeds of price support, though; if the ministry restricts next year’s exports to this year’s level – their usual practice – then supplies may not be sufficient to meet recovering demand next year and spur a rise in prices again. At current levels, new sources like Mountain Pass and Lynas’ Australian mine and Malaysian refinery will still be profitable.

There is no suggestion prices will fall below economic Western production again, but share prices have already been sharply knocked back as investors realize the peak of last summer was an unsustainable anomaly.

Of course, to treat all rare earths as one is nonsensical. Some rare earths are rarer than others, and restricted supply will be more of an issue for particular metals, but for the time being, they appear to be moving roughly in step with the possibility of further falls before a floor is reached.

Read Part One here.




Comment (1)

  1. TRU says:

    Rare Earth Prices will continue decline says TRU Rare
    Earth Consultants

    : But the price outlook remains high risk factor
    for developing western REE projects

     

    TRU Group Inc, Tucson, USA, Toronto ON –
    Rare earth metals consultants TRU Group says that recent attempts by Chinese
    suppliers to halt the six-month old steep decline in REE prices is likely to
    fail even though the latest february export data for rare earth oxides prices
    strengthened to US$144,000 per t-REO up significantly over the january figure. Export
    price levels in 2012 are still more than three times the average for 2010
    before the crisis in supply began as a result of Chinese unexpected export
    restrictions. (See accompanying chart). China supplies over ninety per cent of
    global rare earths and sets REE prices.

     

     “Predicting
    how far prices will fall and when price-stability will return to the market is
    complex” says Edward Anderson, President of TRU. “It is not a situation of only
    supply-demand balance even when applied to individual strategic rare earths
    such as neodymium, dysprosium or praseodymium. For one thing the supply
    shortages are artificial as they have been caused only by (reversible) Chinese
    Government market intervention”. He said that western REE projects in the
    pipeline would not only alleviated any supply shortages but also have a direct
    effect dragging prices down as their
    product contribution margins appear so strikingly high. Uncertainty in the rare
    earth price outlook remains a compelling risk factor for new REE projects, a
    factor that TRU will be researching further”. 
     

     

    Anderson announced that TRU will be at the
    upcoming Rare Earth Summit May 2012 in San Francisco where he will meet players
    in the industry to discuss prices and other matters they may raise.

     

    TRU
    Group Inc – trugroup.com – is a leader in rare
    earth element engineering, managing, planning and integrating. The TRU Rare
    Earth Team with direct hands-on experience in designing, engineering and
    operating REE facilities. The firm has undertaken feasibility studies and due
    diligence on major REE projects from resource geology, mineral processing,
    chemical extraction, oxalate separation and metal refining. TRU Rare Earth Team
    has technically and financially simulated numerous rare earth engineering
    options and indeed studied and ranked over seventy of the most advanced rare
    earth pipeline projects. For more information view trugroup.comrare-earth-news

     

    Contact:

    Edward R
    Anderson, President & CEO, TRU Group Inc

    B.Sc.(Hons)., Dpl.(Marketing Research).,
    MBA., FCIArb

    anderson@trugroup.com

    Cell: 1-520-229-7836    

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