US strategic rare earth reserve closer after key Chinese exporter stops production

A temporary production stoppage by China's largest rare earth exporter makes the creation of an American rare earth stockpile more likely, according to a report by dealReporter that appeared in yesterday's FT. 

The stoppage was a "wake-up call" for the US Department of Defense because the rare earth elements are needed for a variety of defense applications, writes dealReporter, citing a congressional source.

The article quotes congressional sources and three rare earth companies saying that "the creation of a US rare earth strategic reserve is more likely to get the go-ahead after (Inner Mongolia Baotou Steel Rare-Earth (SHA:600111)) halted production. Such a move would create another source of demand for the metals, likely aiding a rebirth of the US rare earths industry."

Two years ago China reduced its export quota of rare earth elements, which has led to a surge in prices and exploration activities by rare earth companies eager to hunt for the materials used in everything from manufacturing electric cars to cell phone components to magnets used in guidance missiles.

Nearly all (96%) of the world's rare earth production comes from China.

Getting rare earths out of the ground, and separating and processing them however is an expensive endeavour as MINING.com reported last week, with 96% of non-Chinese rare earth companies predicted to fail according to one expert.

MINING.com reported Oct. 23rd on a plan by Molycorp., the only rare earth producer in the Western hemisphere, to spend   $114 million to accelerate by three months the start-up of its rare earth processing facility at Mountain Pass, California.

The mine has re-opened after closing in 2002 due to low rare earth prices and a series of radioactive wastewater spills.