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 available 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. Read on for a short introduction to the rare earths market and rare earth metals prices.
China’s control of pricing
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 for 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 thrive when rare earth metals prices fell again, but there are still a number of juniors out there.
In 2014, the World Trade Organization ruled against Chinese export quotas for rare earths, and China removed its quotas in January 2015. The country also eliminated its export tariffs for rare earths in May 2015, leading to a further fall in rare earth metals prices. It’s been suggested 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 and silver, rare earth metals prices are hard to come by, as there is no widely used public exchange for rare earths (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.
Not all rare earths created equal
Rare earths are used in a range of different technologies, and demand is higher for some than it is for others. They can be divided into “heavy” and “light” categories based on their atomic weight, and heavy rare earths are often more sought-after.
That said, light rare earths can be important too. For example, neodymium and praseodymium, which are used in 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.
Rare Earth Market Outlook 2016
A look at rare earths in 2015 and the rare earth market outlook for 2016.
The concentration of different rare earths varies within each given deposit, but usually a deposit is dominated by either heavy or light rare earths, 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. As a result, they are 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 and 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.”
Rare earth concentrates and pricing
Think rare earths are easy to separate? Think again. As mentioned above, rare earths deposits contain various types of rare earths, not to mention a range of other impurities such as 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 rare earth juniors trying to make it outside of China are planning to produce a mixed rare earths concentrate from their operations to sell to another entity to separate.
It’s important for investors looking at rare earth 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 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 earth juniors are targeting innovative technologies aimed at helping them separate rare earths at a lower cost.
Approach prices with skepticism
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. In these reports it’s common to use an average of rare earth metals prices from recent years to extrapolate on where prices are headed. However, as Hykawy has noted, some averages might include the anomalous rare earth price spikes from 2010 and 2011, leading to price predictions that deviate from broader trends.
This is an updated version of an article originally published by the Investing News Network in 2015.
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Securities Disclosure: I, Sivansh Padhy hold no direct investment interest in any company mentioned in this article.