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Rare Earths Rise as China Hoardes Valuable Supplies

22 Jun

Rare earth element prices have risen dramatically over the past few weeks as companies have begun “hoarding” supplies.

Attempting to make sense of the recent spike, analysts note many companies are buying and holding on tightly to their rare earth investments with the expectation of future price increases.

This speculation has contributed to the recent rally, which has been particularly notable in some of the heavier rare earth elements.

The 17 rare earth elements are used extensively in a wide variety of high tech and clean energy technologies including electric vehicles, fluorescent lights and wind turbines.  China produces over 90% of global rare earths and dominates this lucrative market.

The Chinese govenment’s fluctuating restrictions on rare earth export quotas has been a major cause for concern in the market, particularly amongst high tech and clean energy manufacturers in the United States and Japan, the world’s largest rare earth importers.  in 2010, China cut rare earth export quotas by 40% and, following a political dispute, temporarily halted shipments to Japan.

Click here to watch a BBC Video on Rare earths mining:  China’s 21st Century gold rush

China has been successful in capturing much of the rare earth market thanks to many years of mining under rather loose environmental standards.  However, Chinese regulators have begun to tighten up their mining standards and shut down illegal mines.  As these efforts continue, it is likely much of China’s rare earth producing power will be concentrated into fewer, but larger, state-owned mines.

Anticipating sustained increases in demand, particularly as it’s domestic clean energy industry grows, China instituted a stockpiling program in 2010 to ensure that it retains sufficient domestic rare earth supplies.  Eventually, China aims to store 200,000 tons of rare earth elements – nearly twice its annual production.

Uncertainty over high prices and China’s future rare earth policies has prompted increased mining activity for rare earths in many other parts of the world, including the United States and Australia.  Rare earth supplies are crucial to the energy security of the United States, says the U.S. Department of Energy (DOE), which published a Strategic Plan for developing and acquiring alternative resources without increasing dependence on China.

Learn more – read our FAQ:  “What are rare earth metals?”

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