Rare Earth Mania And China/US Trade Spat 2.0?

We doubt that many have heard of it, or know what it’s used for, but the price of Praseodymium-Neodymium (sold in oxide form) has been on a tear, up 43% ytd.


Neodymium and Praseodymium, collectively known as NdPr, are two of the family of seventeen rare earth elements (REEs). The price of several other REEs, like Terbium – Ticker SHRATBOX (really) and also used in very powerful permanent magnets - have been rising too (up 36% ytd). 

Unfortunately for the rest of the world, especially the US, China has a monopoly on the rare earths market with 85-90% of global production.

REEs are strategically important due to their (small but critical) applications in products used for the defense and technology sectors - including today’s mainstay of human existence, the mobile phone. China’s dominance arose from undercutting almost every other mining and processing player in the decades prior to its WTO entry.

The current story behind the higher prices is that China is getting serious (again) about the environmental impact of REE mining, and is making renewed efforts to curb significant levels of illegal production. On Monday, managing director of Australian-based rare earth producer, Lynas Corp (who just happened to note how her company is “highly leveraged to any increase in price for NdPr”) commented.

“Demand has always been strong, growth for the magnetic materials will increase as there is greater adoption, particularly for electric vehicles…(and) wind turbines. The second thing, however is that the Chinese central government has been very active over the last six months in ensuring that a lot of what had been announced recently, has actually been enforced on the ground…they have inspected a lot of plants to ensure that they have proper documentation for their raw materials and that has helped to eliminate illegal supply.”

(4Q17 conference call here)

The environmental impact in China is certainly horrendous (see BBC report, “The dystopian lake filled by the world’s tech lust” here).  Sometimes described as “hell on earth” or “the worst place on earth”, this is one view of the Baotou toxic lake, 20 minutes from Inner Mongolia’s largest city with 2.5 million inhabitants.

Okay but…

Obviously, the most important issue these days is what does it all mean for equity prices? Higher rare earth prices are beginning to have an impact. This is the chart for the industry behemoth, China Northern Rare Earth Group.

Closer to home, the price of the VanEck Rare Earth/Strategic Metals ETF has also been moving higher, even though some of holdings are plays on non-REE strategic metals, like moly and titanium.

With a market cap of $62m and small/mid cap constituents, things could get interesting if REE prices enter a sustained bull phase.

Adding insult to injury for its strategic interests, the last remaining rare earth mine in the United States, Mountain Pass in California, has recently been sold to a consortium including Shenghe Resources Holding, which has alleged ties to the Chinese Government. 

Two days ago, Michael Silver, CEO of advanced materials manufacturer, American Elements Corp., met with Trump’s chief strategist, Steve Bannon, and Chief of Staff, Reince Priebus, at the White House.  In “This CEO Wants Trump to Nationalize the Only Rare-Earth Mine in America”, Bloomberg reported.

“The mine should be converted to a national laboratory ‘dedicated to rebuilding America’s rare-earth mining industry so the world knows it is safe to build high-tech manufacturing plants in the U.S.,’ Silver said…he’s proposing the U.S. government apply the Takings Clause of the 5th Amendment and acquire Mountain Pass by eminent domain.”

If anybody’s thinking that surging rare earth prices, China/US tensions and soul-searching about how the US could have let China dominate the global supply of such critical materials, sounds familiar… they’d be correct. It feels a bit like 2010 when there was a sudden mania followed by a  collapse in rare earth stock prices. Below is the Lynas Corp chart during 2010-12.

In the end, China backed down on substantial cuts to export quotas, which it had justified on environmental grounds. In part, this was due to WTO intervention at the behest of western countries led by the US.

The NdPr price peaked in Summer 2011 and never really recovered (chart below). Some analysts speculated whether the resolution of the rare earths dispute, peak in the gold price and the beginning of the ramp in Chinese gold imports through Hong Kong were linked. There was no evidence to support the assertion.

This time around, we have no idea whether the situation in rare earths will come close to the fun that was had in 2011, however, we remain mindful of the quote attributed to Deng Xiaoping that: “There is oil in the Middle East, but there is rare earth in China.”

Comments

The Wizard thesonandheir Thu, 07/20/2017 - 21:43 Permalink

Rare earth magnets will be what is used for manufacturing zero point energy generators. Faraday and Tesla technology has been suppressed for too many years and we are beginning to see a breakthrough. Check out what these magnets are doing.The oil tycoon money changers know their days are numbered and are switching their investments.https://www.youtube.com/watch?v=BOWLWe9HEMw&feature=youtu.be

In reply to by thesonandheir

38BWD22 New_Meat Thu, 07/20/2017 - 17:56 Permalink

  Rare earth metal prices jump around as much as Bitcoin...I considered an investment or two back in 2011/2012, glad I didn't get into it.I bought Iridium (Pt-Group metal) powder a year or two ago at $640 / oz, now sells (retail) for $1070 / oz in 10 oz quantities.  Ir is extremely rare (second rarest element) and is even denser than Platinum.http://www.libertygoldandsilver.com/rhodium.htm

In reply to by New_Meat

Stuck on Zero New_Meat Thu, 07/20/2017 - 18:00 Permalink

It should be the industrial policy of the U.S. to handle dumping of commodities to gain market share in a very simple manner. If the product is sold below production cost buy it and store it. This drives the price up to where your own companies can compete and drives your currency down. When the "dumper" finally gives up respond by dumping all the stored product on the market to put the dumper out of business and use the proceeds to support your own company and technology. If you don't perform some facsimile of this you will los everything.

In reply to by New_Meat

Sudden Debt New_Meat Thu, 07/20/2017 - 20:28 Permalink

First of all, RARE EARTHS.... aren't rare at all.They are extremely common.It's rather a mining problem because so many mines are idle right now.But they all can be restarted really really fast.So watch out with that rare earth stuff.I've did some research a few years back because I tought it might be a good investment and then you find out they're the worst investments. Also, the market is really small as a lot of traders just buy directly and sell directly without middlemans as it's just a raw commodity. Rare earths aren't rare. What they are actually is dirty. Seriously dirty and that's why America stopped mining them.

In reply to by New_Meat

Delberta HRClinton Thu, 07/20/2017 - 18:53 Permalink

Inner Mongolia (China) does produce the bulk of the world's rare earth -- as a by-product of iron mining.  That's mostly from the "Northern Rare Earth" company identified above. China's production boom in rare earths (mid-80's) was kicked off with China's industrialization ... built on ... IRON MINING.  Many people have asserted that there are vast North Korean deposits of rare earths ... but no legitimate technical reports have ever been produced ... so who knows. Show me the drilling results!  Given NK's the lack of infrastructure, financial capital and intellectual capital these deposits (if they exist) may as well be on the moon.  Besides the capital and rare-earth talent is just across the border in China! If it was there and economic the Chinese would be all over it. 

In reply to by HRClinton

markl Thu, 07/20/2017 - 17:46 Permalink

Rare earth mining and processing is incredibly filthy dirty. There are lots of rare earths in the ground in Nevada and all over S.America and Africa. I'm perfectly content to leave ours in the ground while China pollutes and kills off hundreds of thousands of their citizens.And, btw, if Chinese rare earths were more expensive than mining + cleanup to US standards, our mines would re-open.

Umh Thu, 07/20/2017 - 18:04 Permalink

Dig a trench between the people of California and the strip down the coast. You get many of the rare earths and a border moat.

ogretown earleflorida Thu, 07/20/2017 - 18:15 Permalink

It is almost hard to believe that the first thorium nuclear plant came to us through Ike's "Atoms for Peace" program....and then dismantled the plant and grew a park where the plant once stood.  America was so far ahead in those days.  And now China is going to cross the finish line first with its thorium reactors and win the energy battle forever. 

In reply to by earleflorida

earleflorida Diatom Fri, 07/21/2017 - 12:03 Permalink

Here's an interesting tidbit/ fact for you--- America's got a nuclear waste problem--- a yuuuge problem!https://www.csis.org/analysis/finding-solution-america%E2%80%99s-nuclear-waste-problem  Thorium Reactors R&D (controlled testing) [have], for quite a while been using 'spent nuclear waste' as a fuel!Spent Fuel--- Spent 'Waste' Fuel!!!This is where the 'Deep Pockets' are quietly buying--- fact is, its hard for a little guy to tie-up his liquid assetts in a waiting game--- that is[?], when the 'Money (BIG $$$ BOYS) Changers', [change[!]] the 'Energy Game'?!?  

In reply to by Diatom

fbazzrea Thu, 07/20/2017 - 18:05 Permalink

Ucore Rare Metals (UURAF) has proprietary technology for "Molecular Recognition Technology" that economically separates REE from coal ash of which there is an unfathomable "free" supply. DOE Secretary Rick Perry recently mentioned the technology during a White House press conference.https://invest.ameritrade.com/grid/p/site#r=jPage/https://research.amer…"The US government continues to showcase an increased awareness of the need to flex its market power to support domestic production of rare earth elements ("REE") and other critical materials," said Jim McKenzie, President & CEO of Ucore. "Combined with the previous Department of Energy REE project championed by Senators Joe Manchin and Lisa Murkowski, as well as the METALS Act and subsequent NDAA amendment introduced by Representative Duncan Hunter, it's clear that the US Congress is fully aware of the precarious situation for REE and other strategic and critical materials now faced by the US Department of Defense.""We believe that Molecular Recognition Technology ("MRT"), an innovative American-based green technology pioneered by IBC Advanced Technologies, Inc. ("IBC") of Utah, is a leading competitive platform for domestic REE development opportunities offered by the Department of Defense," said Steven R. Izatt, President & CEO of IBC. "MRT offers a platform for US domestic production of REE and REE-containing products in a global market that is currently dominated by Chinese suppliers. We welcome the initiatives set out in the National Defense Authorization Act, and look forward to the advancing this remarkable technology."MRT has recently been selected by the Department of Energy to achieve high yield and economical large-scale production of marketable REE products from coal mining refuse (see Ucore Press Release dated June 12, 2017). Since 2011, the Department of Defense has identified 15 of the 17 REE as being "critical". However, the Department of Defense remains heavily reliant on imports of rare earths from non-allied foreign nations, primarily China.

38BWD22 fbazzrea Thu, 07/20/2017 - 18:15 Permalink

  Ucore and IBC may have a great set of technologies.  I read some of their test reports and press releases, but I am not a chemist so cannot vouch for MRT.  Could be a big winner though, and worth keeping an eye on.Ucore gets its raw material (or will get it) from a US island off the coast of SE Alaska.  Much of the rare earths are the "heavy" ones, worth more on the average.

In reply to by fbazzrea

fbazzrea 38BWD22 Fri, 07/21/2017 - 02:21 Permalink

Ucore gets its raw material (or will get it) from a US island off the coast of SE Alaska. this was their original plan but having discovered the nation's growing mountains of coal ash (burned coal residue) under long-term conservation management as REE-rich "gold mines", they've shifted near-term focus away from their 100%-owned Bokan-Dotson Ridge REE property.i hold shares. 

In reply to by 38BWD22

gregga777 sinbad2 Thu, 07/20/2017 - 18:54 Permalink

The treasonous American political parasite class would rather see high employment in the Communist Peoples Republic of China instead of seeing Americans productively employed.  There are ~102 MILLION unemployed working age Americans but the treasonous American political parasite wants that to explode even higher.  

In reply to by sinbad2

osolomio Thu, 07/20/2017 - 18:18 Permalink

A tip for stock buyGGG AustraliaGDLNF USA over the counterCurrently 10 cents usGreenland Minerals and Energy Huge resource in GreenlandYes I own some shares and am buying more.

King of Ruperts Land osolomio Thu, 07/20/2017 - 19:05 Permalink

Rare earths are not like gold were there is for all practical purpose an unlimited market that will buy all you have or can find and economically produce.

The limited number of companies that make high tech magnets and electronic components will most likely be integrating vertically all the way to the mines to lock in the supply they need for their industry.

Were I would look for rare earths is in the ore streams already being mined and in waste piles. they would not have even registered in the past, as there was no market for them.

Anyway penny stocks are penny stocks. If you haven't tried them take a taste. Read the whole prospectus.

In reply to by osolomio

King of Ruperts Land Thu, 07/20/2017 - 18:28 Permalink

An Important Factoid: "Rare Earth Element" is a name given to a group of elements in the periodic table. They are not actually necessarily "rare" as in hard to find or in low concentrations in the earths crust. Aluminum (not a rare earth element but an example) use to be a very rare and expensive metal, simply because it had no established use and was a novelty only smelted in a lab. It isn't any more and its ore is cheap as dirt and found by the mountain load.