March 22, 2011 (Source: WSJ)-- Prices for rare-earth metals continue to soar despite the prospectof short-term market disruption from the disasters in Japan, the No. 1global importer.
China's exports of rare earths in the first twomonths of 2011 came to 7,084 metric tons, according to data publishedTuesday by Hong Kong-based Economic Information & Agency, whichpublishes statistics it gets from China's General Administration ofCustoms. That's up just 0.3% from the first two months of 2010 but abouthalf as much as Beijing said would be permitted for sale overseas inthe first six months of 2011. And at an average price of $44,361 ametric ton, the price was almost double last year's average of $23,603,and many times the price paid in the first two months of 2010. And theaverage price for eight rare-earth metals tracked by Australia's LynasCorp. was holding Monday at 91% above the Dec. 31 level.
The numbers from China underscore how Beijing's policy to tightencontrol of this strategic industry continues to fuel a rally in a marketfor rare earths, a collective name for 17 minerals used in technologyfrom mobile phones to military equipment. China controls more than 95%of the global production, and constrained supplies have prompted a rushinto rare-earth mining globally over the past year.
But events inJapan have become another major focus for the rare-earth industry. Theelements are used in a range of products turned out by in the world'sNo. 3 economy—including cars, which have cerium in their glass,lanthanum in their batteries and neodymium in their electronics.Sustained factory closures in Japan could pinch demand from the country,whose aggressive buying in recent years has reflected concern thatBeijing's policies could make some materials unobtainable.
Theearthquake knocked stock prices lower for some prospecting companies,reflecting sensitivity that any disruption in Japanese demand would hurtrare-earth prices and make already risky mines more difficult tofinance. A correction was already underway before the earthquake, after ahuge 2010 rally in major miners: Shares of U.S. producer Molycorp Inc.are off about 10% this year while Lynas is down 2.9%. (Shares in China'sbig producer, Shanghai-listed Inner Mongolia Baotou Steel Rare Earth,however, are up around 17%.)
So far, market analysts say evidencesuggests any disruption in Japan's demand will be limited. Indeed, someargue Japan's post-earthquake nuclear crisis could spark extra demandfor longer-term—for instance, for neodymium magnets used in windmills.
"Onecould anticipate a positive impact for rare earths as they are used ingreen energy," said one Europe-based trader. "It seems to me people willfocus more on renewables."
The trader said his Japanese clientsindicate they are focused on more than business now, so information isin short supply. But at least in some cases they are reaffirming orders."They are not cancelling or delaying," said the trader.
Alsoshaping global rare-earth trends are rumblings in Washington, wherecritics of Beijing's export tightfistedness are urging retaliation,possibly with a case at the World Trade Organization. Last week, twosenators said Chinese miners should be barred from investing in the U.S.until rare-earth supplies are guaranteed. Congressional aides say billswill shortly be introduced that could require the U.S. military tostockpile rare earths.
China set its initial first-half exportquota at 14,509 metric tons, and policymakers haven't indicated whenthey will release a subsequent one. Last year, exports came to 39,813metric tons, valued at $940 million. Some analysts expect China toadjust mechanics of the quota, which now applies to all 17 of theelements and may have distorted pricing of some elements.
At theannual meeting of China's legislature earlier this month, CommerceMinister Chen Deming said quotas are needed to protect China'senvironment, according to Xinhua news agency, and also urged othercountries with prospects to produce rare earths to accelerate theirmining-permit process so alternative sources can developed.
"Weare even willing to cooperate with countries like Japan in developingalternatives of rare earth because rare-earth resources are very limitedindeed," Mr. Chen said.