China was once responsible for over 90 percent of global rare earths production, allowing it to restrict exports and manipulate prices. However, following a WTO ruling against that practice earlier this year and moves to crack down on illegal mining, China’s share of global rare earths production could be dropping.
It seems that the time has finally come for China’s rare earths monopoly to subside. The country was once responsible for over 90 percent of global rare earths production, allowing it to restrict exports and manipulate prices. However, following a WTO ruling against that practice earlier this year and moves to crack down on illegal mining, China’s share of global rare earths production could be dropping.
China Minmetals, itself a state-owned company, has said that the country’s rare earths market share could drop to 65 percent, according to the South China Morning Post. Minmentals’ assistant president, Wang Qionghui, told the publication that although legal production has “grown modestly” in recent years, “with strengthened control on illegal activities, the actual supply will gradually fall.”
He also cited increased overseas production as a factor that’s reducing China’s grip on the market. US-based Molycorp (NYSE:MCP) has expanded its Mountain Pass operations in California, while Australia’s Lynas Corporation (ASX:LYC) appears to be ramping up production at its Malaysian plant. The assistant president sees other projects coming online in Australia and Greenland as well.
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To be sure, there are other factors that have reduced China’s stranglehold over rare earths. Brad Plumer of Vox summarizes the issue in three main points.
When China began to restrict its rare earths supply, Japanese electronics companies made efforts to reduce their use of rare earths in response. For example, Panasonic (OTCMKTS:PCRFY) found a way to recycle neodymium and Hitachi (OTCMKTS:HTHIY) worked to minimize its use of dysprosium in electronic cars. Furthermore, the same restrictions that drove up prices and profits for China also allowed other rare earths operations to spring up across the globe. Though some of those companies struggled when prices fell down again, it’s key to note that they were able to grab a foothold.
Finally, rare earths export controls were not as effective as China would have liked. A recent report shows that over 40 percent of the country’s magnetic rare earths supply is illegal, and some of those producers were still able to get their production out of the country.
Other countries are already stepping up their efforts to enter the rare earths market. Badly bruised Molycorp and Lynas appear to be making efforts to bounce back, and India is working with Japan to commission a 5,000-tonne-per-year rare earths plant. In addition, Russia is developing a new method to extract rare earths from domestic uranium resources.
Still, Minmetals’ Qionghui cautioned that China will still produce ”over 70 per cent of the world’s heavy rare earths,” in the medium term, since other global projects tend to be focused on light rare earths. However, with global rare earths demand slated to increase dramatically in the coming years, others will certainly want to step up to the plate. Of course, investors interested in the critical metals space will be eagerly watching to see which projects pop up next.
Speaking of heavy rare earths projects outside of China, Northern Minerals (ASX:NTU) received environmental approval from the Australian government for its Browns Range heavy rare earths project last Tuesday. Managing Director George Bauk said at the time that the company is now set to become “the first significant dysprosium producer outside of China.” The company is now focused on completing a feasibility study for Browns Range and securing offtake and financing agreements.
Also last week, Ucore Rare Metals (TSXV:UCU,OTCQX:UURAF,FWB:U9U) put out a request for proposals to prepare a bankable feasibility study (BFS) for its Bokan–Dotson Ridge project in Alaska. The company plans to move ahead with the permitting processes for the project in tandem with the BFS.
Finally, Rare Earth Minerals (LSE:REM) reported a new rare earths discovery on its Greenland exploration licenses. Sixteen samples taken from the properties exceeded 7,000 ppm total rare earth oxides, with one value as high as 18,179 ppm, or 1.82 percent.
Rare Earth Minerals CEO Kiran Morzaria said, “[t]he discovery of a new Rare Earth Element deposit east of the world class Kvanefjeld REE project is significant for REM. These assay results are orders of magnitude higher than those previously reported and are indeed higher than the reported resource grades on the nearby Tanbreez deposit.”
Securities Disclosure: I, Teresa Matich, hold no investment interest in any of the companies mentioned in this article.