Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Pausing Stocks and Gold Fireworks - 21st Apr 21
Precious Metals and Miners Start of New Longer-Term Bullish Trend - P2 - 21st Apr 21
Looking For A Mortgage Broker? Here Is How To Hire One - 21st Apr 21
Amazon AMZN Stock PRIMEDAY SALE! Trend Analysis - 20th Apr 21
Stock Market Sentiment Speaks: You May Not Believe My 2021 Targets - 20th Apr 21
Stock Market Phase Two Projection - 20th Apr 21
Are Precious Metals & Miners Starting A New Longer-Term Bullish Trend? - 20th Apr 21
Inflation: First the Gain, Then the Pain… - 20th Apr 21
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

China’s Rare Earths Monopoly - Peril or Opportunity?

Commodities / Metals & Mining Sep 30, 2011 - 01:58 AM GMT

By: OilPrice_Com

Commodities

Best Financial Markets Analysis ArticleThe prosperity of China’s “authoritarian capitalism” is increasingly rewriting the ground-rules worldwide on the capitalist principles that have dominated the West’s economy for nearly two centuries.

Nowhere is this shadow war more between the two systems more pronounced than in the global arena of production of rare earths elements (RREs), where China currently holds a de facto monopoly, raising concerns from Washington through London to Tokyo about what China might do with its hand across the throat of high-end western technology.


In the capitalist West, as so convincingly dissected by Karl Marx, such a commanding position is a supreme and unique opportunity to squeeze the markets to maximize profits.

Except China apparently has a different agenda, poking yet another hole in Marx’s ironclad dictums about capitalism and monopolies, further refined by Lenin’s screeds after his Bolsheviks inadvertently acceded to power in 1917 in the debacle of Russia’s disastrous involvement in World War One. Far from squeezing its degenerate capitalist customers for maximum profit (and it’s relevant here to call Lenin’s dictum that if you want to hang a capitalist, he’ll sell you the rope to do it), Beijing has apparently adopted a “soft landing” approach on rare earths production, gradually constricting supplies whilst inveigling Western (and particularly Japanese) high tech companies to relocate production lines to China to ensure continued access to the essential commodities.

REEs are found in everyday products, from laptops to iPods to flat screen televisions and hybrid cars, which use more than 20 pounds of REEs per car. Other RRE uses include phosphors in television displays, PDAs, lasers, green engine technology, fiber optics, magnets, catalytic converters, fluorescent lamps, rechargeable batteries, magnetic refrigeration, wind turbines, and, of most interest to the Pentagon, strategic military weaponry, including cruise missiles.

Technology transfer is the essential overlooked component in China’s economic rise, and Beijing played Western greed on the subject like a Stradivarius, promising future access to China’s massive market in return, an opium dream that rarely occurred for most companies. You want unimpeded access to Chinese RREs? Fine – relocate a portion on your production lines here, or…

Which brings us back to today’s topic.

Rare earths and investment – where to go?

China is riding a profitable wave, which depending on what figures you read, produces 95-97 percent of current global supply, and unprocessed raw earth earths ores are currently going for more than $100,000 a ton, or $50 a pound, which some of the exotica fetching far more (niobium prices has increase an astounding 1,000 percent over the last year). Rare earth elements like dysprosium, terbium and europium come mainly from southern China.

According to a United States Energy Department report, dysprosium, crucial for clean energy products rose to $132 a pound in 2010 from $6.50 a pound in 2003.

The soaring prices however have also invigorated many countries and producers to begin looking in their own back yards, for both new deposits and former mining sites that were shuttered when production cost made them uneconomic before prices went through the ceiling.

However, a number of unknown factors play into developing alternative sources to current Chinese RRE production. These include first prospecting possible sites, secondly, their purity and third, initial production costs, where modest Chinese labor costs are a clear factor.

The 17 RRE elements on the Periodic Table are actually not rare, with the two least abundant of the group 200 times more abundant than gold. They are, however, hard to find in large enough concentrations to support costs of extraction, and are frequently found in conjunction with radioactive thorium, leading to significant waste problems.

At hearings last week before U.S. House of Representatives Committee on Foreign Affairs Subcommittee on Asia and the Pacific, Molycorp, Inc. President and Chief Executive Officer Mark A. Smith stated that his company was positioned to fulfill American rare earth needs, currently estimated at 15,000-18,000 tons per year, by the end of 2012 if it can ramp up production at its Mountain Pass, California facility.

Which brings us back to foreign producers. A year ago Molycorp announced that it was reopening its former RRE mine in Mountain Pass, Calif., which years ago used to be the world’s main mine for rare earth elements, filing with the SEC for an initial public offering to help raise the nearly $500 million needed to reopen and expand the mine. Low prices caused by Chinese competition caused the Mountain Pass mine to be shuttered in 2002.

Mountain Pass was discovered in 1949 by uranium prospectors who noticed radioactivity and its output dominated rare earth element production through the 1980s; Mountain Pass Europium made the world’s first color televisions possible.

Molycorp plans to increase its capacity to mine and refine neodymium for rare earth magnets, which are extremely lightweight and are used in many high-tech applications and intends to resume production of lower-value rare earth elements like cerium, used in industrial processes like polishing glass and water filtration.

In one of those historic economic ironies, China was able to increase its RRE production in the 1980s by initially hiring American advisers who formerly worked at Mountain Pass.
The record-high RRE prices are also underwriting exploration activities worldwide by more than six dozen other companies in the United States, Canada, South Africa, Malaysia and Central Asia to open new RRE mines, but with each start-up typically raising $10 million to $30 million, not all will succeed. That said, the future is bright, as almost two-thirds of the world’s supply of REEs exists outside of China and accordingly, China’s current monopoly of REE production will not last.

So where do investors look to cash in on the RRE boom?

First, do your homework.

Exhibit A is Moylcorp, which would seem to be in unassailable position as regards U.S. production, but which nevertheless on 20 September after JPMorgan Chase & Co. lowered its rating of the company, citing declines in rare-earth prices, causing its stock to plummet 22 percent in New York Stock Exchange composite trading, despite being the best-performing U.S. IPO in 2010 after beginning trading in July, more than tripling after rare-earth prices soared as China cut export quotas.

Is there money to be made in RREs?

Undoubtedly – but the homework for the canny investor needs to extend beyond spreadsheets to geopolitics, mining lore, chemistry and Wall Street puffery. That said, it seems likely that whatever U.S.-based company can cover the Pentagon’s RRE requirements is likely to see more than a minor boost in its bottom line.

Gentlemen, place your bets – but do your homework first.

Source: http://oilprice.com/Metals/Commodities/Chinas-Rare-Earths-Monopoly-Peril-or-Opportunity.html

This article was written by Dr. John CK Daly for Oilprice.com who offer detailed analysis on Crude Oil, Geopolitics, Gold and most other commodities. They also provide free political and economic intelligence to help investors gain a greater understanding of world events and the impact they have on certain regions and sectors. Visit: http://www.oilprice.com

© 2011 Copyright OilPrice.com- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules