Rare earth element (REE) prices are unlikely to fall to levels last seen in 2003, according to market participants.
The previous collapse in rare earth prices forced a number of mines outside of China to close down, and many analysts feel that played a main role in the supply crunch that saw prices surge to record highs in 2011.
However, attendees of last week’s Magnetics 2013 conference in Orlando said they do not expect prices to replicate this trend as China looks likely to stabilize the market through stockpiling, reductions to export quotas and an overall clampdown on black market sales.
“China does not want prices to go as low as in the past. In its recent white paper, the government said it wanted to prevent the black market and arbitraging. It wants to prevent the instability seen after the run-up in 2011,” John Ebert, business manager at Yunsheng USA, a producer of neodymium permanent magnets, told Metal-Pages.
“Prices over time, like anything, will stabilise when there are more choices. I think it took an act like this to get people off their backsides and do something about it. It will take a few years for the orchard to ripen, but it will bare fruit and it took this act for something to happen.”
Jim Herchenroeder, vice president of engineering and North American sales manager for Molycorp Magnequench, a division of Molycorp (NYSE:MCP), underlined this point, noting that China has implemented measures to help prevent drastic price variations.
“What we saw in China was actually an exercise in pure economics. There were no regulations on mining or production and any price was a good price,” he said to Metal-Pages. “But now the market is different and it’s more regulated in terms of production and it’s more stable. So you have to ask yourself, which one do you like better?”
Attendees also discussed whether recent price declines will affect the viability of rare earth facilities outside of China, such as Molycorp’s Mountain Pass facility in California and Lynas Corporation’s (ASX:LYC) operation in Malaysia.
Russia to invest in REEs
The Russian government has approved a $4.87-billion investment program focused on developing REE and rare metals production, Metal-Pages reported. Its aim is to meet domestic demand and enter the global market by 2020.
The program will reportedly focus on the exploration and development of resources, as well as the adoption of critical technologies to develop the production of strategic metals and REEs. It is part of a wider government strategy that is aimed at developing the scope and competitiveness of Russian industries, including ferrous and non-ferrous metal manufacturing.
Implementation of the program will take place in two stages, with the port city of Murmansk being the central production focus, according to a report by ProEdgeWire.
From 2013 to 2016, a series of research and exploration works will be completed. After that time, the explored fields will be registered. The second stage will involve the provision of state support to established enterprises in the form of loans, tax breaks and overall improvement of the licensing system.
The region — which already accounts for 75 percent of Russia’s total REE reserves — presents an ideal opportunity, according to Marina Kovtun, governor of Murmansk.
Chinese praseodymium-neodymium oxide prices remain firm as suppliers show no plans to adjust prices during Chinese New Year (February 9 to 15).
Most players have left the market and only a few plants are producing during the New Year break, according to Metal-Pages. One producer based in Southern China stated, “[w]e have little stock and expect prices to rise slightly after the New Year break when consumers begin to buy. We will restart production in early March.”
Sources confirmed that 99-percent praseodymium-neodymium oxide is being offered at $48,123 to $49,728 per tonne, while lanthanum market prices are unchanged from last week, with 99-percent lanthanum oxide trading at $7,218 per tonne.
Although some sources suggest that the European yttrium oxide market is recovering, the market in China remained stagnant this week, with almost no business reported amidst unchanged prices. Market sources have pointed out that most suppliers are holding offer prices firm and have suspended production for the New Year break.
Current prices for 99-percent dysprosium oxide are stable at $320 per kilogram, while the europium oxide market remains subdued with unchanged prices. 99.9-percent europium oxide is currently priced at $802 per kilogram, while almost no business for terbium oxide has been undertaken in China in recent weeks. Lanthanum market prices remain unchanged from last week, with 99-percent lanthanum oxide trading at $7,218 per tonne.
The company’s press release states that the development work that has been completed underlines that Strange Lake is a “very large rare earth project with one of the highest concentrations of heavy rare earth elements as well as important by-products zirconium and niobium.”
The current project configuration calls for a conventional open pit and the typical associated mine infrastructure, including camps, maintenance shops, utilities and processing facilities. Quest expects to deliver the PFS for the Strange Lake project within six months.
The program was comprised of surface showing and trench resampling, core drilling and ground geophysical surveying. The press release notes that the new 2012 analytical results “highlight the increasing total rare earth content of the mineralization related to the assaying of heavy rare earth elements in comparison to the 1995 analytical results.”
It also states that a total of 13 samples were analyzed for the complete range of REEs and that the exploration program’s results confirm that the property has high levels of HREEs as well as a high ratio of critical rare earth elements.
At its Lofdal rare earth project in Northwestern Namibia, Namibia Rare Earths (TSX:NRE,OTCQX:NMREF) intersected two new mineralized zones in Area 6 and one new zone in Area 5.
That brings the total number of discoveries at Lofdal — one of which has been drilled into a 43-101 compliant resource — to 17 over a two-year period, according to a press release. Rare earth mineralization occurs in these new zones over very broad widths grading 0.2 to 0.7 percent total rare earth oxide with moderate levels of HREE enrichment (10 to 25 percent).
Namibia Rare Earths’ president, Don Burton, confirmed that Area 6 continues to provide encouraging results over a very large area, noting that while its mineralized zones have lower rare earth enrichment than those seen in Area 4, Area 6 is still a heavily enriched zone with the potential for much higher tonnage.
Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.