Month of may a new run up?
Writing for Seeking Alpha, Michael Roat suggested that May could be a good month for rare earth prices, as he expects companies and traders to begin restocking rare earths soon. He also suggested that many buyers could be “staying on the sidelines” as they wait to see the true effect of the WTO ruling against China’s rare earth export quotas.
As quoted in the publication:
All rare earth buying in the world is hand to mouth at the moment. Rare earths have entered into a deflationary spiral where falling prices leads to deferred purchasing. Once prices begin increasing, companies will enter back into the spot market to restock and this will generate a return of demand. I believe now is the time to have the long rare earth trade on. The fact that China has rare earth tariffs has created a market for rare earths within China and also an international market because of the pricing difference.
One might ask “Why May?” The answer is there are a couple major and important Chinese industrial policy changes taking place in May. One is the lifting of the tariffs because of the World Trade Organization ruling. The second is a 22% to 35% increase in the rare earth resource tax for the domestic Chinese market. The second will offset the first for the international market and also will create a state of rising prices in China. When these policy changes are implemented the rare earth market might go into a state of chaos, so characteristic of the industry as buyers go in for material. The rare earth market is essentially on hold as buyers are staying on the sidelines to see the overall effect of these changes. Therefore, demand is minimal for now as consumers work off inventories and only buy for immediate or short term use. There will soon be one global market for rare earths with the same rising prices.
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