Rare Earths Prices Plunge, but Long-Term Demand Should See Upward Rebound

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--There is a range of opinions on the future of the rare earths market and mining industry following China's cutting back on exports. China controls more than 90% of global production of these strategic products.

The latest twist in the tale comes in a New York Times report that prices for rare earth elements are dropping rapidly after a three-year increase. The reasons for the drop are that large companies in the U.S., Europe and Japan that use rare earth elements in manufacturing are moving operations to China, drawing down inventories and looking for lower-cost substitutes.

International prices for some light rare earths such as cerium, used in the polishing of flat-screen televisions, and lanthanum, used in oil refining, have fallen as much as two-thirds since August and are still declining. Prices have dropped by roughly one-third since August for highly magnetic rare earths like neodymium, which is needed for products such as smart phones, computers and large wind turbines, said the report.

Other sources report that the prices of rare earth elements used in steel production have fallen sharply, following the prospect of instability in the global economy and reduced steel demand in Europe and emerging countries. Molybdenum trioxide, which is used in stainless steel production, fell 28% from its peak in February to $12.70 per kilogram at the end of October. A similar drop was experienced by vadium, which is used in special steel production. The price of the element dropped 13% to $27.05 per kilogram.

A report from the European Union's Joint Research Centre (JRC) does not focus on the declining prices and substitutions for rare earth elements, but says that supply shortfalls over the next two decades have put the EU's ambitious plans to expand the use of solar power, wind power and alternative fuels at risk.

The JRC says that solar power projects will require half the current world supply of tellurium and 25% of the supply of indium. Europe's wind energy program will need a steady supply of neodymium and dysprosium.

In 2010, with 95% control of global rare earths output, China produced more solar panels than the rest of the world combined.

The threat of the Chinese control of supplies, the prospect of new production coming into operation around the world in the next three years, and the substitution of rare earths by new technologies promises a healthier, more balanced price structure and global supply chain in the medium term.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.