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2011 Well Underway, but What Lies ahead?

Posted by admin at 9:39 AM on Mar 9, 2011

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By Clint Cox

Please accept my sincere apologies for the delay in posting this year. Regardless of my tardiness, I’d still like to give an outlook for 2011:

2011 should be a pivotal year in many respects. Let’s start with China, the key player…

China Consolidation

First of all, the Chinese are consolidating their industry, and this may mean considerable changes for the entire industry. There might be 4-6 real winners within China, and depending on how this plays out, it will affect how the industry plays out both within and outside China. Will production be reduced? Become more efficient? Become more environmentally friendly? This is something to watch.

Prices Inside China vs. Outside China

There is a HUGE difference right now between prices inside and outside China. For instance, according to Metal Pages, cerium (Ce) oxide is priced at about $6/kg (converting from RMB) inside China versus about $90/kg outside. That’s a big difference. Many junior companies are really excited about this price differential, but keep in mind that it is a function of the export quota, and this can change very quickly.

World Economy

Anything can happen in the economy, and the world economic picture is looking fairly unstable. There is mounting debt worldwide, and rising commodity prices in the face of large unemployment. If the economy fails, the REE sector will suffer along with it.

Government Involvement

The Japanese government has already stepped in and decided to spread some money around the rare earth sector this year. Will Europe follow? The US? Other countries?

Substitution and Efficiency

The Japanese have stated that they want to substantially decrease their reliance on rare earths by trying to substitute or lessen their usage in applications. This is a great idea, but there is always some amount of sacrifice — be it price, weight, or performance characteristics. Also, I have heard it said from R&D folks that it is difficult to “schedule innovation”. There will be some increased efficiency in the usage of REEs, but they will not be replaced this year. In fact, there may be some new applications that will absorb extra supply.

Unknown Developments

This is always the big humdinger! Last year it was the dramatic cuts by the Chinese — no one that I know saw the severity of this coming. This year it could be new projects coming on stream that were unexpected (or announcements of new projects). It could also be further cuts or further dramatic price increases. Will the Chinese change the rules again? It will be a HUGE year, I think.

Thanks!