REE Price Rally to Lift Asian Producers


"Demand, political tensions combine to drive prices."

A sharp drop in Chinese exports of rare-earth metals has fueled a rally in global prices, and Asian miners of these commodities are poised to benefit.

Japanese manufacturers that use the metals have managed to hold off the brunt of the price pain for the now, shortages of the metals are possible next year, strategists said.

Japanese companies have seen a large decline in imports of the rare earths from China since July, according to The Wall Street Journal.

"While investors watch the gold price touch new highs, metals termed 'rare earth' that are used in a variety of industrial applications have climbed far faster over the past month," strategists at Nomura told clients in a note issued last week.

"The increasing need by the electronics industry for special metals with defined characteristics, such as inertness, conductivity and fusibility, has seen a revival in demand for [rare earths]," Nomura strategists said.

That demand combined with the tension between China and Japan last month to boost prices for the rare earths worldwide, and the price of rare earths has soared by 200% over the past three months.

China, the world's biggest REE producer (accounting for more than 95% of global supplies of rare earths), could be at an advantage.

"China would withstand the inflation from higher prices due to massive volume of capacity and output [of rare earths], and control over most of the life cycle of the finished goods that the planet can't live without," said Richard Hastings, marco and consumer strategist at Global Hunter Securities. "All of this encourages more investment in China."

Meanwhile, Australian companies are set to add more production, Nomura strategists said.

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