Two Rare Earth Stories

This is a tale of two stories. What it illustrates is, in some ways, the importance of “timing”, and in other ways the timeless nature of the economic process. The more things change, the more they stay the same.

So, a while ago, Rare Earths were all in the news. China had displaced other producers as the main producer in the world (largely on the back of byproduct production from their iron ore mining) and looked to have a functional monopoly on pricing. Then, having achieved dominance, they cut supply. They had opened their own facilities manufacturing things, like magnets, that needed Rare Earths and so said they were justified in selling to them selves in preference, as they were going to be doing all the manufacturing anyway.

When last we looked at it, here: https://chiefio.wordpress.com/2010/09/25/are-rare-earths-rare/

We found that the elements are not rare, just the particular ore “earths” where they were originally found. So stories like this one:

http://www.bloomberg.com/news/2011-06-17/rare-earth-prices-double-on-china-industrial-minerals.html

Rare Earth Prices Double in Two Weeks as China Seeks to Increase Control
By Jason Scott – Jun 17, 2011 6:47 AM GMT+0100

Prices of the rare earths used in lasers and plasma televisions more than doubled in the past two weeks as China tightens control of mining, production and exports, according to market researcher Industrial Minerals.

The cost of dysprosium oxide, used in magnets, lasers and nuclear reactors, has risen to about $1,470 a kilogram from $700 to $740 at the start of the month, Industrial Minerals said in an e-mailed statement. Europium oxide, used in plasma TVs and energy-saving light bulbs, has more than doubled.

China, supplier of 95 percent of the 17 elements known as rare earths, has clamped down on rare-earth mining and cut export quotas, boosting prices and sparking concern among overseas users such as Japan about access to supplies. The government may further reduce export quotas, pushing prices higher, Goldman Sachs & Partners Australia Pty said last month.

“China has long said it will consolidate the industry but it’s moving more rapidly than many observers anticipated,” said Dudley Kingsnorth, a former rare earths project manager and now chief executive officer of Perth-based advisory Industrial Minerals Co. of Australia. “There might be an element of speculation but I think the price rises have been driven by people who are desperate for the product.”

The world’s most populous nation will raise standards for exporters and won’t approve new project expansions in an effort to curb overcapacity, illegal mining and sales, the government said last month. The Ministry of Land and Resources said yesterday it wants to set aside some rare earth deposits.

Would be expected to have a “limited shelf life” as mines open (or re-open) in other places. In California, Molycorp is preparing to reopen “soon”. So tickers like REE for Rare Earth Elements and MCP for Molycorp ought to rise over time. (But, being mining stocks, they will be volatile).

We even looked at some price charts:

Selected Rare Earth Miners vs SPY Index Benchmark

Selected Rare Earth Miners vs SPY Index Benchmark

Nice runs up in some of the smaller stocks, especially some of the Australian ones.

Soundly beating the broad market and even broad spectrum miners, like BHP.

Probably plenty of more room to run (though eventually they will drop, as more supply turns scarcity and artifical restriction into glut and oversupply. Mining is like that. Great for trading, very nerve wracking for investors.)

The Other Shoe

But as inevitably happens when someone tries to corner a resource market, folks find alternative materials, or alternative sources. Then it’s “just a matter of time”.

http://sg.news.yahoo.com/huge-rare-earth-deposits-found-pacific-japan-experts-053441925.html

Huge rare earth deposits found in Pacific -Japan experts
By El Tan in Hong Kong and Yuko Inoue in Tokyo | Reuters – 1 hour 9 minutes ago

TOKYO (Reuters) – Vast deposits of rare earth minerals, crucial in making high-tech electronics products, have been found on the floor of the Pacific Ocean and can be readily extracted, Japanese scientists said on Monday.

“The deposits have a heavy concentration of rare earths. Just one square kilometre (0.4 square mile) of deposits will be able to provide one-fifth of the current global annual consumption,” said Yasuhiro Kato, an associate professor of earth science at the University of Tokyo.

The discovery was made by a team led by Kato and including researchers from the Japan Agency for Marine-Earth Science and Technology.

They found the minerals in sea mud extracted from depths of 3,500 to 6,000 metres (11,500-20,000 ft) below the ocean surface at 78 locations. One-third of the sites yielded rich contents of rare earths and the metal yttrium, Kato said in a telephone interview.

The deposits are in international waters in an area stretching east and west of Hawaii, as well as east of Tahiti in French Polynesia, he said.

He estimated rare earths contained in the deposits amounted to 80 to 100 billion tonnes, compared to global reserves currently confirmed by the U.S. Geological Survey of just 110 million tonnes
that have been found mainly in China, Russia and other former Soviet countries, and the United States.

Details of the discovery were published on Monday in the online version of British journal Nature Geoscience.

The level of uranium and thorium — radioactive ingredients that are usually contained in such deposits that can pose environmental hazards — was found to be one-fifth of those in deposits on land, Kato said.

A chronic shortage of rare earths, vital for making a range of high-technology electronics, magnets and batteries, has encouraged mining projects for them in recent years.

China, which accounts for 97 percent of global rare earth supplies, has been tightening trade in the strategic metals, sparking an explosion in prices.

Japan, which accounts for a third of global demand, has been stung badly, and has been looking to diversify its supply sources, particularly of heavy rare earths such as dysprosium used in magnets.

Kato said the sea mud was especially rich in heavier rare earths such as gadolinium, lutetium, terbium and dysprosium.

“These are used to manufacture flat-screen TVs, LED (light-emitting diode) valves, and hybrid cars,” he said.

Extracting the deposits requires pumping up material from the ocean floor. “Sea mud can be brought up to ships and we can extract rare earths right there using simple acid leaching,” he said.

“Using diluted acid, the process is fast, and within a few hours we can extract 80-90 percent of rare earths from the mud.”

The team found that sites close to Hawaii and Tahiti were especially rich in rare earths, he said.

And so it goes. Just as with Uranium, we can get other metals from the sea. Perhaps some day folks will realize: “There is no shorage of stuff. Nothing “goes away”. We never run out. -E.M.Smith”…

https://chiefio.wordpress.com/2009/05/29/ulum-ultra-large-uranium-miner-ship/

can provide all the energy the world would ever need. Now we find that specialized mining / dredging ships can provide more than all the “rare” earth metals we need…

https://chiefio.wordpress.com/2009/05/08/there-is-no-shortage-of-stuff/

https://chiefio.wordpress.com/2009/03/20/there-is-no-energy-shortage/

And so it goes…

Abundance leads to low prices.

Low prices lead to complacency.

Complacency leads to scarcity.

Scarcity leads to higher prices.

Higher prices lead to discovery.

Discovery leads to Abundance.

Repeat.

So, repeat after me:

“There IS NO SHORTAGE of resources.”
“There never has been.”
“There never will be.”
“There is only the need for imagination.”

https://chiefio.wordpress.com/2010/08/08/everything-from-mud/

In Conclusion

So, “embrace your inner child” and go play in the mud. It just might solve all the worlds problems…

MCP Mollycorp

MCP Mollycorp

Also of note, much of the global shipping is built in Korea. I would expect to see any future Rare Earth mining ships built there. One sout note: The “Law Of The Sea Treaty” has made taxes on sea mining quite expensive. One wonders who will exit that treaty first so as to get Rare Earths unencumbered…

Rising nicely lower left to upper right, South Korea ETF:

EWY - South Korea ETF

EWY - South Korea ETF

It looks to me like MCP is “tradable” at the moment, but this news is going to be a damper on the “story” of it being one of the few mines outside China ready “soon”. At present, the chart says “ok to buy in, worry if it doesn’t cross the SMA stack and stay there.

Korea looks good too.

Recent crossovers to “blue on top” for MACD and DMI. RSI with “higher lows”. Only negatives are that the SMA stack looks a bit of a ‘weave’ (that happens at tops, but also at deep ‘dips’) and MACD is presently “below zero”. A bit ‘toppy’, so expect to trade out on reversals, but generally beating the S&P 500 AND we know that the future demand from Japan for “mining ships” is likely to be showing up ;-)

But just remember that MCP will have “first run”, but when EWY is pumping out mining ships, the MCP days are numbered… But that’s likely a couple of years away.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in Economics - Trading - and Money and tagged , , . Bookmark the permalink.

4 Responses to Two Rare Earth Stories

  1. jorrit musters says:

    no need for uranium
    a liquide thorium reactor is much better, safer, cheaper

    see http://www.energyfromthorium.com

  2. j ferguson says:

    Another “finite resource?” I find the persistence of fears of running out of this or that unsettling. It might be true that there are no more carrier bearings for differentials on Datsun 510s, but nothing prevents doing them another way.

    How can people believe that any natural resource could have been completely extracted? Or will be in the not too distant future? Or if specific, not susceptible to substitution or replacement?

  3. E.M.Smith says:

    @J Ferguson:

    Or that all the copper we have “used up” is not still on the planet somewhere…

    Don’t “get it” myself. All I can figure is that there’s some kind of built in wiring in the brain about “famine soon” so we want to pack rat stuff. Fill the larder for winter… Steal the other guy’s girl. Perhaps a byproduct of the periodic famine that DOES happen if you don’t have a decent handle on the multi-generational weather cycles and global production / shipping. (Think “famine in Egypt” in Pharonic times and even “famines in Europe” as recently as The Little Ice Age and a few wars).

    Or perhaps it is just a cultural adaptation to those same things.

    At any rate, we’re prone to worry about “running out” and “the powers that be” have found ways to exploit that to better herd the masses. Thus “The Limits To Growth” book and “AGW” that both look to be products of The Club Of Rome for the purpose of “crowd control” on the average folks.

    The Power Eliite have found a very “usable” meme and are riding it for all it’s worth. At least 35 years that I have personally observed.

    And no matter how much I try to get the idea across to folks that “there is no such place as away, so the copper did not ‘go away’…”; they would rather panic about “running out”.

    Maybe I ought to swap sides and just write a “running ot of everything we’re all going to die!!!!!” book, make a few $Millions on it, and retire ;-)

    Ah, well. The planet recycles everything (and will as long as our nuclear furnace powers the core and techtonics) and the same processes that made the present copper and gold ore are still at work. But someday, when the lava stops flowing, we’ll “run out”… and have to get our minerals from the sea floor muds…

  4. boballab says:

    EM:

    Copper is one of the best examples that there is no such thing as Peak____.

    Man has been using the metal for 10,000 years and we still haven’t run out it.

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