Critical Metals in Global Spotlight Again
Source: Investment U, Tony D'Altorio (6/6/11)
"REE values soar to over $121K/ton, a tenfold increase from a year ago."
Rare earth elements (REEs) have taken the spotlight for two years now, which makes sense, as China began reducing its REE quotas around the same time. The nation produces over 90% of global output. Now, its influence on the REE market matters even more, as prices continue to rise. Some precious metals jumped threefold to fivefold since January alone. That hike followed China's clampdown on domestic output. . .and this has far-reaching implications.
The world uses these metals on a much smaller scale than other commodities, but a wider range of products rely on them.
Most of these rare earth elements are very difficult or flat-out impossible to substitute. So if prices don't start dropping, everything from mobile phones to hybrid cars could get a whole lot more expensive.
China's oversized influence on the rare earths market concerns the global community, including Washington.
The same applies to Tokyo after China temporarily banned such exports to Japan over a diplomatic dispute last year.
And Beijing tightened regulations on its high-polluting rare earths sector as it cleans up its mines. As a result, production will almost certainly fall further.
In fact, the country already cut its export quota further.
This year's overseas sales license is 4.5% lower on an annualized basis than those last year—and over 40% below the 2009 quota.
Hong Kong records show REE exports cut in half over the past year, down to just 1,819 tons in March. Meanwhile, their value abroad soared to over $121,000 per ton, a tenfold increase from a year ago.
No wonder smuggling accounted for about a fifth of total rare earth sales not long ago. But Beijing clamped down on that too, squeezing the global rare earth market even further.
Meanwhile, global demand for the metals continues to grow unabated.