Price of abundant rare earths could halve as hybrid-makers find alternatives

The price of the most abundant rare-earths are set to extend their decline from records this year as Japanese manufacturers, including Toyota the world’s top REE consumer, switch to recycled materials or eliminate the need for REEs altogether.

Prices of certain elements such as cerium used to polish TV screens and lenses are already down 40% after months of break-neck price hikes while lanthanum which finds its way into nickel-metal hydride batteries has shown similar declines. However, the price of some REEs such as samarium used in jet fighter electrical systems are showing no signs of decline despite increasing 25-fold in just three years.

Australia's Lynas Corporation (ASX:LYC) which together with US Molycorp will become the dominant suppliers outside China which currently controls more than 90% of world output, has a breakdown of China's export versus local pricing indicating the dramatic rise in some REEs.

Lanthanum oxide for example has risen from a price of $8.71/kg in 2008 to $135/kg in the second quarter 2011 but has sunk to $80.00 now. However that $80 export price compares to the domestic price in China of $20.63 in September. Cerium oxide, has seen similar falls and is now also trading at $80 from $138 in the second quarter. The price for cerium oxide was $4.56 in 2008.

The less abundant REEs have not fallen back or have actually increased. A kilogram of Samarium oxide increased dramatically from $5.20 in 2008 to average $125 in the second quarter and is now trading at $120. The domestic price in China is only $17.14 for samarium. Neodymium oxide used in windmills have stabilized around $260/kg from some $130/kg at the start of the year.

Dysprosium oxide, also a hybrid vehicle ingredient, has risen from a price of $118.49/kg in 2008 to $921.20/kg in the second quarter 2011 and now trade for $2,300/kg. Dysprosium is also used, in conjunction with vanadium and other elements, in making laser materials. A similar pattern is seen for europium and terbium.

Christopher Ecclestone, an analyst at Hallgarten & Co. in New York, according to Bloomberg has forecast neodymium and praseodymium, metals used in permanent rare-earth magnets, may fall as much as 15% while cerium and lanthanum will drop by 50% in 12 months.

BusinessWeek quotes Jack Lifton, co-founder of Technology Metals Research: “If you think you can keep raising the prices for those materials and still keep your customers, you're crazy. The principal customer for rare-earth metals is a global automotive industry using rare-earth permanent magnets. That industry will engineer this stuff out.” reported back in August China's market for rare earths has begun to see negative effects of its crazy growth this year with an increasing number of downstream players finding it difficult to make deals despite price cuts.

China is in the midst of a crackdown on illegal miners and processors and the busy black market trade that have sprung up, but has struggled to impose a REE production cap, with actual annual output exceeding official quotas by 40% to 50% since 2007.

Image credited to pistolseven /