World scrambles for rare earths after latest China crackdown

Up and away

Reuters reports prices of most rare earth elements – used in consumer electronics, defence and green energy industries – have risen since Wednesday after of local government crackdown on mining, with three major producers slated for closure.

The news follows an announcement from the EU that it is building a stockpile of a variety of REEs and that a high-level meeting of officials from Europe, the US and Japan – the world’s number one importer – will take place in Washington early next month to discuss supply security. The price of some REEs such as samarium oxide used in jet fighter electrical systems has increased 25-fold in just three years.

Reuters reports Li Guoqing, director of the mining management bureau of Ganzhou city in the eastern province of Jiangxi, said three of eight major rare earth producing counties would stop production by year-end.

China has in the past struggled struggled to impose a REE production cap, with actual annual output exceeding official quotas by 40% to 50% since 2007 as high prices encourage illegal small scale mining and a black market trade.

Australia’s Lynas Corporation (ASX:LYC) which together with US Molycorp will become the dominant suppliers outside China 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 $111.00 now. However that $111 export price compares to the domestic price in China of $23.44 in September. Samarium Oxide has increased even more dramatically: from $5.20/kg in 2008 to $130.00 at 5 September 2011. The domestic price in China is only $20.31 for samarium.

The European Union announced on Tuesday it is planning to build a stockpile of 3,000 tons of mixed rare earth carbonate and has approached Molycorp (NYSE:MCP), which earlier this year bought the Silmet plant in Estonia, to become a supplier.

Reuters quoted Molycorp Silmet CEO David O’Brock on Monday: “The one thing the EU does not want to happen is someday the Chinese say, ’that is it, no more lanthanum.’ Shut down your war machines because you can’t get high octane fuel anymore.’”

EES Group reports officials from the United States, European Union and Japan will gather in Washington early October to find ways of cutting demand for rare earth minerals.

MINING.com reported at the end of August on China’s rare earth black market prices are falling as producers begin to see negative effects of its crazy growth this year. Prices of certain elements such as cerium used to polish TV screens and lenses are down 10% over the summer after months of break-neck price hikes.

Chart from Wikemedia Commons by Michael Diggles

Image is of an F-22 Raptor of the US Air Force on September 26, 2010 at the Kaneohe Bay Airshow in Hawaii by tomas del amo / Shutterstock.com.

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