Rare earths are not as rare as you might think, but the market and rare earth metals prices are certainly complicated. There are 17 rare earths in all, and each can be classified under different groups, with prices for multiple individual and mixed products.
From heavy rare earths to light rare earths, magnet materials and beyond, it can all seem a bit overwhelming at first glance. Case in point, Argus Rare Earths keeps track of no less than 58 rare earth metals prices and rare earth oxide prices every two weeks.
Here’s a short introduction to a few basics on the rare earths market and rare earth metals prices.
All about China
First and foremost, it’s important to know that China is the main driver when it comes to the rare earths market and rare earth metals prices. The country is the world’s largest rare earths producer, putting out over 90 percent of the world’s supply.
China had such a monopoly that rare earths prices spiked in 2010 and 2011 when the country cut exports. That sparked a boom in the creation of rare earths companies and projects around the world as many sought to create a reliable supply of rare earths outside of China. Many rare earths projects outside of China failed to develop when rare earth metals prices fell again, but there are still a number of juniors out there taking a crack at the space.
In 2014, the World Trade Organization (WTO) ruled against Chinese export quotas for rare earths, and China removed its quotas in January. The country also eliminated its export tariffs for rare earths in May, leading to a further fall in rare earth metals prices.
There have been suggestions that the country’s hold on the market could weaken in the near future. For now, however, China remains the heavyweight, so it’s important that investors interested in the space keep track of what the country is up to in terms of rare earths production.
Where to find prices?
Unlike prices for gold or silver, rare earth metals prices are hard to come by, as there is no widely used public exchange for rare earth metals (save for China’s collapsing Fanya Metal Exchange). Firms such as Argus put out regular price assessments based on surveys of traders, marketers, consumers and other market participants. This information is available for a fee.
However, Ucore (TSXV:UCU) rare metals recently came out with a rare earths prices app, with data provided by Asian Metal. Price forecasts and other information can also be found via analyst firms such as Adamas Intelligence, Stormcrow Capital and Technology Metals Research.
Rare Earth Market Outlook 2016
A look at rare earths in 2015 and the rare earth market outlook for 2016.
Not all rare earths created equal
Rare earths are used in a range of different technologies, and some are more in-demand than others.
Rare earths can be divided into “heavy” and “light” categories based on their atomic weight, and heavy rare earths are often more sought-after. However, light rare earths can be important too. For example, neodymium and praseodymium, which are important for rare earth magnets, fall into the light category.
Neodymium, praseodymium and other elements used in rare earth magnets, such as dysprosium, can be quite expensive. Current prices for dysprosium metal are around $270 per kilogram, while prices for dysprosium oxide are sitting at $210 per kilogram, according to the Ucore rare earth metals prices app.
In contrast, the going price for cerium metal is about $5.40 per kilogram.
Why? While the concentration of different REEs varies within each given deposit, usually a deposit is dominated by either heavy or light rare earth, with some elements being much more abundant. Cerium, for example, is the most abundant rare earth, and is more plentiful in the Earth’s crust than copper.
Both cerium and lanthanum – which are used in steelmaking and industrial catalysts, among other things – are oversupplied. Thus, they’re priced quite a bit lower than most rare earth magnet materials.
Another group of rare earths to consider is those used in phosphors, or phosphorescent materials, which are the active component responsible for adding color in fluorescent light bulbs or other lighting applications. Jon Hykawy of Stormcrow Capital puts it pretty succinctly when it comes to looking at the market for phosphor rare earths; in short, yttrium is “fairly cheap,” while europium and terbium “are rare, and they’re expensive.”
Yttrium oxide is priced at about $4.40 per kilogram, or $37.50 per kilogram for yttrium metal. Terbium metal and terbium oxide come in at $520 per kilogram and $380 per kilogram respectively, while europium metal and europium oxide are priced at $345 per kilogram and $110 per kilogram.
The purest of them all
Think rare earths are easy to separate? Think again. As mentioned above, there are 17 rare earths to consider, not to mention a range of other impurities that often includes uranium and thorium, which can be troublesome to dispose of.
The separation process can be difficult and lengthy, and so far, separators outside of China have not managed to undercut producers within the country. In order to avoid the extra headache, a number of junior rare earths companies trying to make it outside of China are planning to produce a mixed rare earths concentrate from their operations to sell to someone else to separate.
It’s important for investors looking at rare earths juniors to keep in mind that rare earths within a mixed concentrate won’t fetch as high a price as those that are already separated. When looking at technical reports from junior mining companies, be sure to double check that companies have accounted for this discount when calculating their rare earths basket price (that’s the price for all the rare earths bundled into a single number based on the distribution of different rare earths within the deposit).
Other rare earths juniors are targeting innovative technologies aimed at helping them separate rare earths at a lower cost as well.
As a final note, investors would be wise to watch out for price assumptions in technical reports that might not be as realistic as they could be.
It’s common to use an average of rare earth metals prices from recent years to extrapolate where prices are headed, as part of the process for determining prices for technical reports. However, as Hykawy has noted, some averages might include the anomalous rare earths price spikes from 2010 and 2011, leading to price predictions that deviate from broader trends.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.