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