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10 Things to Watch for in Rare Earth in 2008

Posted by admin at 3:48 PM on Jan 9, 2008

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By Clint Cox

Welcome to 2008!

January seems to be a great time for a “top ten” list! These aren’t predictions or forecasts, but merely some thoughts about the things that will undoubtedly shape the rare earth marketplace during this coming year. Here they are, without further adieu, and in no particular order:

The economy. If the world economy (or even the US) goes into recession, then there is the distinct possibility that rare earth businesses may suffer a setback. Key REE uses such as catalysts for cracking petroleum, phosphors for color screens, and many magnetic applications may be curtailed somewhat by a significant cutback in spending. The economy serves as a backdrop to the entire industry.

Chinese production. The Chinese cut production in some of their most prolific mining areas in 2007 in order to better control and consolidate the industry as well as address environmental concerns. There is also talk of shifting mining operations from one part of Bayan Obo–the largest rare earth mine in the world–to another that has more iron (the primary target for the mine) and less REE (considered a by-product). How this will affect output remains unclear.

Chinese export quotas and tariffs. There has been a steady trend of decreasing exports and increasing tariffs for the rare earths coming out of China. China is absorbing more and more of its own REE production. The industry has embraced this new reality, but if there is a surprise cessation of export for any given element it might send shockwaves through end users. The tariffs have also been accepted, but will hopefully be increased at a slow and steady pace.

Progress of current mining projects. There is great interest from the entire industry in getting new mines in production outside of China. There are a number of possibilities spanning the globe that hope to fulfill this need. Established players in the REE industry are gaining momentum by publishing pre-feasibility studies, raising money, moving dirt, and staking new claims. Progress is important for these established projects, because according to Roskill 40,000 tonnes of new material may be needed by 2012. The key to understanding new supply is how well the projects in the pipeline meet the current and future needs of the marketplace. Also, technological innovations in mining and processing may have a positive impact these current projects.

New REE mining projects. The rare earth sector in an attractive growth industry that is beginning to pull new players to the REE table with the power of a neodymium supermagnet! With increasing publicity and a growing realization about the supply deficit, new players are sure to begin surfacing soon. We can only wait with eager anticipation to see if new companies may become public in 2008.

New uses. The industry is rapidly developing new technologies that utilize the rare earth elements. Will 2008 bring a breakthrough technology? REE history is filled with sudden shifts in demand based on new technologies.

Stockpiling. The Committee on Assessing the Need for a Defense Stockpile (part of the National Research Council) has named several rare earths in their recent report “Managing Materials for a 21st Century Military”. The US may not be stockpiling REEs yet, but they are certainly taking a close look at it. Japan has also considered the matter. Stockpiling can affect the industry in a number of ways. In the short term, it could certainly take some product off of the market and drive prices up. However, as rare earth needs can shift over time, stockpiled elements may become less useful for their intended purpose and placed back on the market (thus, unexpectedly lowering prices). The timing and size of possible stockpiling is unknown, but further steps maybe taken in 2008.

Investor awareness. If the investment community becomes more alert to the critical role that rare earths play in modern society — as well as the supply and demand crunch that may be looming — there may be a “rare earth rush” of sorts. Rare earth companies have been able to raise substantial money over the last year, so we may be at the beginning of a wave of new interest. However, the industry is cognizant that any prominent misstep by a public rare earth company may sour investors on the sector.

Thorium research accelerating. Thorium (Th) is often found with rare earth elements, and must be properly disposed of — and this can be costly. However, there is a burgeoning interest in using Th as fuel for nuclear reactors. The great advantages that Th has over uranium are that it does not need to be enriched and it cannot be used for nuclear weapons. Current technology is in various stages of testing, and the nuclear industry has yet to embrace Th. But there is potential for the future, and it is quite possible that this current REE liability could become an asset within a decade.

The unforeseen. Every year there are exceptional surprises in this business — 2008 will likely follow the trend!

I look forward to providing information from a variety of sources within the REE industry in 2008.

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