Rare Earth Minerals are a crucial component of a host of Green Industries and Defense Sectors.China possesses a near monopoly over the supply of these Minerals which it wants to use to advance its economic and strategic interests.Recently China imposed an Export Quota over the Exports of Rare Earths leading to Fears amongst Developed Nations.US has been thinking of taking the issue up at WTO while EU and Japan have expressed concerns.Japan is totally dependent on imports from China given that it has little or no reserves.Japanese AutoMajors like Toyota,Nissan and others require high amounts of these minerals in the manufacture of Electric Vehicles.The sharp lowering of Export Quotas has already thrown the plans of the Green and Auto Companies in doldrums.Now there is news that China has imposed an informal embargo on exports of these rare earth minerals to Japan
Sharply raising the stakes in a dispute over Japan’s detention of a Chinese fishing trawler captain, the Chinese government has placed a trade embargo on all exports to Japan of a crucial category of minerals used in products like hybrid cars, wind turbines and guided missiles.
Chinese customs officials are halting all shipments to Japan of so-called rare earth elements, industry officials said on Thursday morning.On Tuesday, Prime Minister Wen Jiabao personally called for Japan’s release of the captain, who was detained after his vessel collided with two Japanese coast guard vessels about 40 minutes apart as he tried to fish in waters controlled by Japan but long claimed by China. Mr. Wen threatened unspecified further actions if Japan did not comply.
China flexing its muscles through Rare Earth Minerals Exports
Recently Rare Earth Minerals Companies have seen sharply rising exports.Molycorp which came out with an IPO in the US markets has seen its stock price shooting up despite not producing commercial quantities.Other Australian and Canadian Companies have also seen steep increase in stock price.The Chinese Embargo should lead to further price appreciation as other countries focus on expanding supply and production of these minerals.The recent spat between Japan and China over a fishing boat incident has escalated in recent times with the top leadership in China taking issues.China’s relations with other countries have deteriorated in recent times with increasing trade friction with USA,Currency and Territorial Issues with Japan and growing Tension with India over border and land issues.
Canadian Avalon Rare Metals (AVARF) is up 114% since then, Australia’s Lynas Corp. (LYSCF) has rocketed 282%, and Great Western Minerals Group (GWMGF) has gone ballistic, with a 191% rise. The new IPO for Molycorp (MCP), which I have been touting since well before its launch, has raced up 68% from its July launch price of $14.
The smart money is pouring into companies with greater production of the more valuable heavy rare earths, like dysprosium, Dy, terbium, Tb, and europium, Eu. The Chinese, which control 97% of world production, dominate in the lighter end of the spectrum, such as in cerium, Ce, lanthanum, La, and neodymium, Nd. This is why Great Western has secured the rights to South Africa’s Steenkampslraal Mine, and Avalon is attempting to raise $844 million to develop the Nechalacho Mine in the far north of Canada, which is also rich in the heavies (click here for the link).