Rare Earths in 2009: Cover Your Eyes, Grit your Teeth, and Hope for the Best!
By Clint Cox
Welcome to the New Year! The Rare Earth industry is one that has the ability to humble us all — so please view the following comments as “possibilities” and not “prognostications”. Without further adieu, key issues to watch for in 2009:
This is the story for rare earth in 2009. How bad will it get? How will it affect the REE market? Rare earth prices have begun to drop.
In brief, this year could be catastrophic for global economics. Bouts of panic may pop from the globe like a truckload of kettlecorn. Spending on rare earth exploration and consumer end-products that use REEs could deteriorate dramatically. This could be a tough year.
Depending on which nations are involved in conflict in 2009, and how bad it gets, there may be an increased desire for the REEs for use in military applications. It is somewhat tragic to view war as a positive for this market, but it is possible.
Lynas Corporation says they are on schedule to be producing REE product by the 4Q of this year. If there are delays or problems it may affect the perception of the rare earth market. The industry is hoping for success in this (and other projects). If Lynas is successful, it could lead to funding for other projects. If Lynas has delays, it could provide opportunities for other companies, or it could taint the entire sector – it is very difficult to know.
Financing for many current exploration projects is certainly in question.
That said, the world is desperately in need of viable projects outside of China that can compete economically.
Chinese Output / Stockpiling
What will Chinese output be this year? Will the iron mine at Bayan Obo (which has enough REE by-product to make it the largest REE mine in the world) continue at the current pace if there is a downturn? The Chinese have already declared that they will create a stockpile of 300,000 tonnes of concentrate. That is a lot of concentrate! That will hang over the light rare earth (LREE) market like a dark cloud for years to come.
How much production can the South China clays handle? Will Sichuan regain previous form? There are always surprises in Chinese production – undoubtedly, this year will provide more fireworks.
The consolidation has begun. The plan is to consolidate each of the three REE mining districts – Bayan Obo/Baotou, Sichuan, and South China Clays – under one Chinese company each. This will create substantial efficiencies and allow the Chinese regulatory agencies to more closely control the flow of REEs.
Chinese Export Quotas
The Chinese have once again cut export quotas for the first 6 months of 2009 to 15,043 tonnes versus 22,780 tonnes in 2008.
Will this have impact? With companies outside of China working down their own stockpiles, will they need to purchase as much? These are issues to watch closely this year.
Who Blinks First?
Chinese officials have made it very clear: If foreign manufacturing companies move their facilities to China, they will be guaranteed a steady supply of rare earths. Many technology companies are reluctant to do this because they want to protect their intellectual property, but will the temptation of an endless REE supply be too much?
This will probably remain a staple in the annual market outlook for years to come. New technologies, new exploration discoveries, basic economics, and geopolitics can all reverberate through our small industry. It is the nature of this fascinating sector.
I wish you all the very best in 2009!
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