Chinese Contradictory and Obfuscating Cues Indicate more Rare Earth Stock Gains

The Rare Earth Metal Group has been in the news with China issuing mixed signals through the media.Note China enjoys a monopoly over the 17 rare earth minerals group which is essential to a wide variety of Green and Defense Sectors.This has made the other industrial powers wary with USA even thinking of taking China to the WTO over its exports quotas.China’s excuse of controlling rare earth production and exports to protect its environment has proved to be hollow with its informal embargo to Japan.This has made the Japanese Government sit up and take notice.It has announced a major package to look for alternative sources . A recent news story that had China saying that the middle to heavy rare earth minerals were limited and would be exhausted in 15 -20 years and further than it would reduce to export quota in 2011 further has set the cat amongst the pigeons.

Rare Earth Metals which are sold as oxides have seen an exponential price rise in recent months with the corresponding rise in stock prices of rare earth stocks like Lynas,Molycorp,Avalon,Jiangxi Copper,Chinalco,Inner Mongolia BaoTou etc.While China has now said that it will increase production and exports of rare earth minerals next year,the confusing signals are sure to keep the prices of the rare earth minerals high.Note the reserves and production of rare earth minerals are finite and their uses growing ,the prices of rare earth minerals are bound to increase.While the last 2 months increase has been due to a combination of geopolitical factors,quantitative easing and speculation,it looks in the years ahead rare earth price should keep increasing.Note other supply sources are being developed in Russia,Vietnam,Kazakhstan,Australia,Africa and Canada.So there will be a lots of ups and downs,however the secular growth story of rare earth prices is intact.

China Pledges Rare Earth Supply, Signals Export Rise  – Bloomberg

China has already cut the number of rare earth companies this year, said Li Zhong, deputy general manager of Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co.

“There used to be many smaller miners and producers, but this year, after China tightened production rules, all of them were forced out of business,” he said at a conference on the minerals in the northeastern Chinese city of Xiamen today. “We are the sole producer now in” Inner Mongolia.

By 2015 the government wants to reduce the number of rare earth oxide producers from 90 to 20, he said.

China set the production cap at 89,200 metric tons this year, while slashing its export quota to 22,300 tons, according to estimates by Guosen. “The reduction of output and exports this year was to prevent raw materials being sold too quickly and too cheaply,” Peng said by phone from Shenzhen today, adding that rising prices may lead to higher exports.

China Rare Earths to Last 15-20 Years, May Import  – Bloomberg

China’s medium and heavy rare earths reserves may last 15 years to 20 years at the current rate of production, possibly requiring imports, the Ministry of Commerce said today.

Domestic rare earths deposits dropped to 27 million metric tons by the end of 2009, or just 30 percent of the world’s total known reserves, from 43 million tons, or 43 percent of the world total, in 1996, Chao Ning, section chief of foreign trade at the ministry said at a Beijing conference.

“China cannot afford to continue to carry the burden of supplying the world, from a strategic, environment and economic point of view,” Chao said.