Why Light Rare Earth Metals Prices Have Furthest to Fall

by Stuart Burns on September 21, 2012

Style:    Category: Metal Prices, Minor Metals

Continued from Part One.

Most observers believe light rare earth metals have the furthest to fall, as heavier rare earths will be supported by still-constrained supply.

Nearly half of Molycorp’s Mountain Pass production will be in lighter cerium oxide, where prices could fall further to $0.50 per kilogram, according to analyst Edward Otto at Cormark Securities.

Intriguingly, Reuters makes the point that light rare earths such as cerium oxide and lanthanum oxide will be hit hardest by the new production because they are not rare at all; they are estimated to be more plentiful than copper and lead.

Not that rare earth supply has completely lost its potency to raise concerns and talk of crippling industry.

Comments made by a senior advisor to the Chinese government were reported by the Telegraph, calling for an attack on the Japanese bond market to precipitate a funding crisis and bring the country to its knees, unless Tokyo reverses its decision to nationalize the disputed Senkaku/Diaoyu islands in the East China Sea.

As part of the same spat, the Hong Kong Economic Journal reported that China is drawing up plans to cut off Japan’s supplies of rare earth metals — a move against which Japan has been hoarding rare earths in preparation for the last year or more.

The future for rare earths seems to be one of increasing price divergence as prices for heavier REEs such as terbium oxide and dysprosium oxide remain high; prices for terbium oxide peaked at $1,750 per kilogram, but are expected to settle at $1,500 per kilogram, while those for the lighter rare earths continue to fall.

The benefit for rare earth consumers will be lower overall prices, and for the rest of us, the possibility of new products exploiting the advantages of the lower-cost lighter rare earth metals.

Indeed, almost uniquely in the metals markets, one of the key dynamics in the future could be new technological developments for these lighter metals arising from their lower cost, creating spikes in demand.

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