This latest announcement from China could drive prices significantly higher as consumers are left scrambling to meet their quotas.
As trade wars continue to rage between China and the US, the Asian nation has upped the ante by capping its output of rare earths for the rest of the year.
The increasingly in demand critical metals are paramount components to high strength permanent magnets used in wind turbines and electric vehicles, as well as other electronics.
Due to the increased demand from manufacturers and end users, rare earth prices have performed relatively well all year. However, this latest announcement from China, will likely drive the price significantly higher as consumers are left scrambling to meet their quotas.
China is both the world’s largest producer and consumer of rare earths producing roughly 156,000 tonnes annually, accounting for 80 percent of all global demand. According to Reuters, China plans to reduce its output by 36 percent, while only supplying its own domestic buyers.
Last year alone, the US consumed some 11,000 tonnes of rare earths from China, a number that will be drastically reduced this year. Of course, consumers can look to companies outside of China to supply their needs.
The problem is that the largest rare earth producer outside of China, Lynas (ASX:LYC,OTCMKTS:LYSDY), cannot produce the type of output that China is removing from the market.
Despite being the second-largest rare earth producer, Australia-based Lynas only accounts for approximately 12 percent of global production. To compound things, Lynas is currently undergoing an environmental review after battling with Malaysian locals and the government about its mining practices.
While a readily available new source of rare earths may be years or decades away, recycling has become a viable alternative, and as China limits production it may become a relied upon resource, helping manufacturers complete their products.
GeoMegA Resources (TSXV:GMA), a Canadian rare earth company focused on the separation of rare earths, is using aqueous chemistry to separate rare earth materials from magnet residue and waste.
“We currently produce 99.5 percent purity Nd and Dy oxides,” Kiril Mugerman, CEO and president, explained in a recent interview with the Investing News Network.
The rare earths produced by the company have a variety of uses. “[The] main application is the NdFeB magnets, they are also used in ceramics, lasers and other applications.”
While GeoMegA may not be able to shore up the deficit created by China reducing output, the company’s green recycling process has the potential to supply rare earths affordably, and in an environmentally friendly way.
“Over the last five years we were developing this separation technology, which is the major bottleneck of the rare earth sector. We have managed to now scale up our technology significantly that we are now producing the most critical oxides from magnet residues in a clean and economical way,” Mugerman said.
“The objective is to keep scaling up and de-risking the technology through cash flow and penetrating the market in that way.”
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.