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Rare earth prices soar even as China pledges supply
Mark Drajem and Gopal Ratnam
Wednesday, October 20, 2010
WASHINGTON -- Rare-earth prices have jumped as Chinese export quotas crimped worldwide supplies for the elements used in the manufacture of disk drives, wind turbines and smart bombs.
Prices have climbed sevenfold in the last six months for cerium oxide, which is used for polishing semiconductors, and other elements have more than doubled, according to Metal-Pages Ltd. in London, which tracks rare-earth prices.
Actions by China, which produces more than 90 percent of the world's rare earths, have drawn criticism from U.S. lawmakers and officials in Japan and Germany. China reduced its second-half export quota for the minerals by 72 percent in July. It is now further restricting exports, according to industry participants.
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Prophecy Resource Goes Into Production
at Ulaan Ovoo Coal Mine in Mongolia
A commission appointed by Mongolia's Ministry of Mineral Resources and Energy has conducted the final permit inspection at Prophecy Resource Corp.'s Ulaan Ovoo mine site and has instructed the company to begin coal production. Prophecy Resource (TSX.V: PCY) has begun production of its first 10,000 tonnes of coal as a trial run of supply to be taken by rail to electric power stations in Darkhan and Erdenet, Mongolia's second and third largest cities after the capital, Ulaanbaatar. The company is the second-ever Canadian mining company to get a permit to mine in Mongolia and start production there.
For the company's complete announcement, please visit:
"Materials are still being held up in customs and shipments are delayed," Jeff Green, president of J.A. Green & Company LLC in Washington, who represents miners and users of the elements, said in a telephone interview yesterday. "Many believe rare-earth quotas for the second half of 2010 are exhausted, leaving materials unavailable for sale."
President Barack Obama's spokesman said the National Security Council staff is looking into reports that China is blocking shipments.
"They've seen the reports," press secretary Robert Gibbs told reporters traveling with Obama on a West Coast campaign trip. "They're looking into them but don't have anything they could confirm about those reports."
China said the quota reduction was needed in order to shut polluting mines and still be able to meet domestic demand. It will "continue to supply rare earth to the world" while maintaining restrictions "to protect exhaustible resources and ensure sustainable development," the Commerce Ministry said in a statement yesterday.
Contributing to the rise in prices is an expectation of further restrictions. China will probably tighten export controls on rare earths next year, Shigeo Nakamura, president of Advanced Material Japan Corp., said at a conference in China yesterday.
Rare earths are a group of 17 chemically similar metallic elements, such as lanthanum, cerium, neodymium, and europium. The elements are used in radar, high-powered magnets, mini-hard drives in laptop computers, catalytic converters for vehicles, electric-car batteries, and wind turbines.
"It's pretty frightening that there may be a gap where U.S. industry pays an extraordinary price," U.S. Rep. Mike Coffman, a Colorado Republican, said in an interview. He said U.S. rare-earth mining isn't likely to resume until at least late 2012 at a mine in Mountain Pass, California.
"The administration needs to join with other countries and have a unified front to tell China this is not appropriate," he said.
China's control of the $1.2 billion market for rare-earth elements gives it "market power" over the U.S., the Government Accountability Office, the investigative arm of Congress, said in a report in April. China restricts exports of the elements through quotas and export taxes, the GAO said.
China has begun to use that market power recently, according to Japanese officials. They said supplies of the elements to Japan were cut after a Chinese fishing trawler collided with two Coast Guard boats in the East China Sea near islands claimed by both countries.
This week, Chinese customs officials began stopping shipments to the rest of the world, according to two people involved in the industry who spoke on the condition of anonymity because of concern about Chinese reaction. Chinese customs officials are delaying shipments by requiring shippers to open containers of the elements for chemical analysis, one of the people said.
What's not clear is whether China has imposed new restrictions or exporters have simply filled the quotas that China imposed in July, the people said.
"Right now it's very difficult to find prices because the situation is so fluid," Ed Richardson, vice president at Thomas & Skinner Inc. in Indianapolis, a maker of magnets for the military who has sought U.S. funding to use rare earths. "China is not talking, but this does fall in line with the quotas they laid out in July."
Prices for cerium oxide rose to $36 a kilogram Oct. 19 from about $4.70 a kilogram on April 20, according to Metal-Pages. Neodymium, used in magnets, rose to $92 a kilogram from about $41 in April and $46.50 in July, the company said.
About 37 percent of worldwide rare-earth sales in 2008 were for magnets used in products such as hard-disk drives, hybrid-electric vehicles, and guided missiles, according to Industrial Minerals Co. of Australia. An additional 31 percent went into phosphors, used in making energy-efficient lights.
China set a production cap of 89,200 metric tons this year, while reducing its export quota to 22,300 tons, according to estimates by Guosen Securities Co. It announced that quota in July, and prices have climbed since then.
Companies and government officials have already begun to react to the threat of a shortage of the elements.
The U.S. rare-earth mine in Mountain Pass, California, shut down most operations in 2002. Molycorp Inc., which owns the mine, plans to reopen it, and Chief Executive Officer Mark Smith said this week that it may double the planned capacity to 40,000 metric tons.
Glencore International AG, the world's biggest commodities trader, also said this week that it would try to restart the Pea Ridge rare-earth mine in Missouri.
The U.S. Defense Department is studying the national- security risks of dependence on China, and Congress is considering legislation to boost U.S. mining and production.
Gamesa Corp. Tecnologica SA, Spain's biggest wind-turbine maker, said countries such as the U.S., Canada, and Australia hold unexploited deposits of rare earths. While most of the minerals are currently obtained from China, "there is no scarcity of rare-earth minerals in the medium to long term," a Gamesa spokeswoman said by e-mail, declining to be identified in line with company policy.
In Germany, the government yesterday adopted a strategy to secure supply of raw materials including rare earths. Chancellor Angela Merkel said last week that it's "urgently necessary" to boost European investment in eastern Europe and Central Asia to counter expanding Chinese interest in rare minerals.
China has cut the number of rare-earth companies this year, said Li Zhong, deputy general manager of Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. By 2015, the government wants to reduce the number of rare-earth oxide producers to 20 from 90, he said.
Traders are now waiting to learn what quotas China may impose on exports for 2011, Green said.
"China might raise the production cap and export quota slightly next year," said Wang Caifeng, who until last week was deputy director at the Ministry of Industry and Information Technology who oversaw the sector, saying that was her opinion. She is now in charge of setting up the ministry- affiliated China Rare Earth Industry Association.
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Sona Resources Expects Positive Cash Flow from Blackdome, Plans Aggressive Exploration of Elizabeth Gold Property
On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia.
Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013."
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