China rare earth prices explode as export volumes collapse 22 Mar 2011 14:11

By Tom Miles

BEIJING, March 22 (Reuters) - China's exports of rare earth metals burst through the $100,000-per-tonne mark for the first time in February, up almost ninefold from a year before, while the volume of trade stayed far below historical averages.

China's squeeze on rare earths, which are used in a wide range of hardware including precision-guided weapons, hybrid car batteries and iPads, has forced prices up dramatically since July last year, when each tonne fetched a mere $14,405 on average.

The apparent price rises have averaged $10,000 per tonne per month but accelerated in February, galloping ahead by $34,000 per tonne, according to Reuters calculations based on data from China's Customs office.

Last month each tonne of exports was valued at $109,036, including the cost of insurance and freight, almost half as much again as the average value in January.

The explosion in export values has coincided with a collapse in volumes coming out of China, the source of almost all the world's rare earth supplies, which has cut export quotas of the 17 rare earth metals and raised tariffs on exports.

China's actions have infuriated its trading partners but lifted the shares of the few mining and prospecting companies outside China that are well-placed to capitalise on the constriction of Chinese supply.

They include U.S. miner Molycorp Inc <MCP.N>, Canada's Rare Element Resources <RES.V> and Neo Material Technologies <NEM.TO> and Australia's Arafura <ARU.AX> and Lynas <LYC.AX>.

But those firms' share prices have been under pressure this month because Japan's earthquake and tsunami are expected to temporarily slash demand from China's biggest customer. In February, 281 tonnes of Chinese exports went to Japan, valued at $38.9 million or $138,406 per tonne. [ID:nN15270138] <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a table of China's minor metals trade, including rare earth exports, please click [MINMTL/CN]

For a graphic of export volumes and values:

http://graphics.thomsonreuters.com/11/03/CN_RREXP0311_CC.gif

For a graphic of the discrepancy between China's old and new ways of presenting rare earth export volumes:

http://graphics.thomsonreuters.com/11/02/CN_RRERTH0311.gif ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

China exported a total of 750 tonnes in February, slightly more than the 647 tonnes shipped in January but otherwise the lowest monthly volume since February 2009, when demand was hit by the global financial crisis.

China's Customs office changed its method of presenting rare earths exports in its headline data this year, boosting the reported volume by including products made from rare earth metals in the total. [ID:nTOE728041]

By that method, exports were 2,976 tonnes in February, up by 132 percent from a year before, when the figure did not include rare earth products.

(Editing by Ken Wills)

((tom.miles@thomsonreuters.com; +86 10 6627 1200; Reuters Messaging: tom.miles.reuters.com@reuters.net))

((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com)) Keywords: CHINA RAREEARTH/

By Tom Miles

BEIJING, March 22 (Reuters) - China's exports of rare earth metals burst through the $100,000-per-tonne mark for the first time in February, up almost ninefold from a year before, while the volume of trade stayed far below historical averages.

China's squeeze on rare earths, which are used in a wide range of hardware including precision-guided weapons, hybrid car batteries and iPads, has forced prices up dramatically since July last year, when each tonne fetched a mere $14,405 on average.

The apparent price rises have averaged $10,000 per tonne per month but accelerated in February, galloping ahead by $34,000 per tonne, according to Reuters calculations based on data from China's Customs office.

Last month each tonne of exports was valued at $109,036, including the cost of insurance and freight, almost half as much again as the average value in January.

The explosion in export values has coincided with a collapse in volumes coming out of China, the source of almost all the world's rare earth supplies, which has cut export quotas of the 17 rare earth metals and raised tariffs on exports.

China's actions have infuriated its trading partners but lifted the shares of the few mining and prospecting companies outside China that are well-placed to capitalise on the constriction of Chinese supply.

They include U.S. miner Molycorp Inc <MCP.N>, Canada's Rare Element Resources <RES.V> and Neo Material Technologies <NEM.TO> and Australia's Arafura <ARU.AX> and Lynas <LYC.AX>.

But those firms' share prices have been under pressure this month because Japan's earthquake and tsunami are expected to temporarily slash demand from China's biggest customer. In February, 281 tonnes of Chinese exports went to Japan, valued at $38.9 million or $138,406 per tonne. [ID:nN15270138] <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a table of China's minor metals trade, including rare earth exports, please click [MINMTL/CN]

For a graphic of export volumes and values:

http://graphics.thomsonreuters.com/11/03/CN_RREXP0311_CC.gif

For a graphic of the discrepancy between China's old and new ways of presenting rare earth export volumes:

http://graphics.thomsonreuters.com/11/02/CN_RRERTH0311.gif ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

China exported a total of 750 tonnes in February, slightly more than the 647 tonnes shipped in January but otherwise the lowest monthly volume since February 2009, when demand was hit by the global financial crisis.

China's Customs office changed its method of presenting rare earths exports in its headline data this year, boosting the reported volume by including products made from rare earth metals in the total. [ID:nTOE728041]

By that method, exports were 2,976 tonnes in February, up by 132 percent from a year before, when the figure did not include rare earth products.

(Editing by Ken Wills)

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BAY STREET-Rare earth plays may not be passing fad 19 Dec 2010 23:30

* Demand for rare earths set to more than double by 2015

* Exploration sector has upside potential in 2011

* Shares could spike when China releases 2011 quotas

* First non-Chinese production expected in late 2011

By Julie Gordon

TORONTO, Dec 17 (Reuters) - Once an obscure corner of the mining industry, rare earth exploration burst on to the front pages this year, sending shares of a group of junior Canadian miners soaring.

The remarkable rally was triggered by a diplomatic dispute that led China to halt exports of the 17 rare earth oxides, many of which are crucial to making iPods, electric cars and other high-tech equipment.

Since China controls about 97 percent of the world's supply of these oxides, which are the processed forms of rare earth elements, shares of Canadian-listed explorers soared, with some stocks jumping as much as 250 percent between September and October.

But with Beijing having resumed shipments, and shares of companies such as Rare Element Resources <RES.V>, Tasman Metals <TSM.V> and Avalon Rare Metals <AVL.TO> having already risen as much as 450 percent in the last 12 months, the question that arises is whether there still an upside for investors.

"If the flow of capital in 2011 is anywhere close to what we had this year," said Van Eck metals analyst Charl Malan. "You can get substantial upside again."

There are three factors likely to keep that capital flowing: China's 2011 export quotas, rapid growth in demand, and the timing of the arrival on the market of output from mines being developed by Molycorp <MCP.N> and Lynas <LYC.AX>, the first non-Chinese producers.

With China set to issue 2011 quotas sometime before the Lunar New Year in February, there is a potential for a spike in rare earth equities in the coming month, analysts said.

Regardless of the quotas, however, there will still be an underlying supply and demand imbalance as the first non-Chinese producers are still in the development stage.

"It wouldn't matter if the Chinese had no quota - it would still be difficult to find some of the materials," said Byron Capital Market analyst Jon Hykawy. "And that's just going to become more obvious in 2011."

Demand for rare earths is set to more than double in less than five years, from 120,000 to 250,000 tonnes by 2015.

Driving this demand are companies like General Electric <GE.N>, which uses rare earths in wind turbines, Toyota <7203.T> and Nissan <7201.T> for their hybrid and electric cars, and Research In Motion <RIM.TO> and Apple <AAPL.O> for their increasing array of smartphones and tablets.

Particularly in demand are oxides like dysprosium, terbium and neodymium, which are used in permanent magnets.

This is a market gap that mines like Molycorp's Mountain Pass in California and Lynas's Mount Weld in Australia will try to fill. But even if they make it to market in the next 12 to 18 months, Molycorp and Lynas's deposits are skewed to "light rare earths" such as cerium and lanthanum, meaning major holes in the supply chain will still remain.

"We still need more dysprosium likely than we'll be able to produce, we still need more terbium than we'll be able to produce, and we still need more europium," Hykawy said.

These so-called "heavy rare earths" are where Canada's explorers have the advantage. Great Western Minerals <GWG.V>, Avalon and Stans Energy <RUU.V> are all clamoring to bring their heavy projects to market, with production projected for 2013 and beyond.

But while the demand is there, analysts say that staffing and technology will likely hold up some projects indefinitely.

ROCKY ROAD TO PRODUCTION

"I think you're going to see massive delays for these guys," said Dahlman Rose analyst Anthony Young. "They're in competition with the biggest companies in the world for talent and for construction expertise."

Mining, milling and processing rare earths is a very complex and labor intensive business, which often involves acids and extreme heat.

"Outside the Mountain Pass mine and some assets in China, there aren't that many people who have been involved in the rare element space," Young said. Staffing "could be a real bottleneck for some of these development stage companies."

It's an issue that is already causing worry for Robert MacKay, chief executive of Stans Energy.

His company is looking to bring the past-producing Kutessay II mine in Kyrgyzstan back online, and has struggled to find qualified staff.

"It's an art and a science. It's not just turning a switch and thinking that rare earths are going to come out the back end of the plant," MacKay said.

Although analysts warn investors to be careful about where they put their money, for those willing to invest in a highly speculative sector that may see only minimal production in 2011, the payouts from rare earths could prove impressive

"I still think it's very early days in the rare earth element space," Young said. "I think there still is a lot of opportunity." (Reporting by Julie Gordon; Editing by Frank McGurty and Peter Galloway) ((julie.gordon@thomsonreuters.com; +1 416 941 8136; Reuters Messaging: julie.gordon.reuters.com@reuters.net))

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FACTBOX-Winners & losers from China rare-earths controversy 20 Oct 2010 15:26

(For a related story, click [nTOE69J03D]

Oct 20 (Reuters) - China has curtailed exports of rare earths, causing offshore consumers to consider alternative supply sources for the minerals which are used in everything from TV screens and computers to mobile phones and toys. [ID:nTOE69J03D]

China supplies about 95 percent of the world's rare earths.

Following is a list of winners and losers if China's rare earths exports dry up:

LOSERS

MANUFACTURERS

* Industrial manufacturers in Japan and Korea, which consumed a fifth of the world's rare earths last year, would be hardest hit by reduced Chinese exports. Sectors that would bear the brunt of restricted supplies would be makers of metal alloys, magnets, catalytic converters and polishing compounds.

* In the United States, manufacturers of catalytic converters would suffer the most, followed by the metal alloying and ceramic-making sectors.

* European Union consumers would face shortages mainly in manufacturing of catalytic converters, given the high concentration of auto-making in the region.

WINNERS

MINERS

* Some new and mothballed rare earths producers would likely get the green light to proceed if China's exports dried up. Many of these projects did not make economic sense while China completely dominated the market. The major projects are:

* Mountain Pass, located in the United States and owned by Molycorp Minerals <MCP.AX>: once the world's largest producer of rare earths, the mine ceased removing ore from its open pit in 2002. Molycorp has continued some production from existing stocks and plans to restart mining an annual rate of 18,000 tonnes in 2012.

* Hoidas Lake (Canada, Great Western Minerals Group <GWG.V>): the project is at an advanced exploration stage with start-up tentatively scheduled for post-2014 at an annual rate of 3,000-5000 tonnes a year.

* Nechalacho (Canada, Avalon Ventures Inc <AVL.TO>): early exploration and costing work is underway to develop a project in about five years producing 3,000-5,000 tonnes a year.

* Mt Weld (Australia, Lynas Corp <LYC.AX>): due to start up in 2011, initially producing about 10,500 tonnes, rising to 21,000 tonnes annually in 2013.

* Dubbo Zirconia (Australia, Alkane Resources <ALK.AX>): could be activated as early as 2013 at an annual rate of 2,500 tonnes.

* Nolans (Australia, Arafura Resources <ARU.AX>): tentatively scheduled to be in production in 2014 and operating at an annual rate of 20,000 tonnes.

* Kvanefjeld (Greenland, Greenland Minerals & Energy <GGG.AX>): the mine is being designed to produce 20,000 tonnes of rare earths as a co-product to uranium. No start date has been disclosed.

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