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:
The Economy
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.
World Conflict
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.
Current Projects
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.
Chinese Consolidation
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 (http://www.metal-pages.com/news/story/36952/).
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?
The Unexpected
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!
Please take time to contact me with any questions you may have on the “Contact” page.