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The rare-earth shortage is only transient? September 7, 2009

Posted by fetzthechemist in Uncategorized.
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I have been exchanging notes with a financial analyst who specializes in the “scarce metals” markets. He gave me an overview of the rare-earth market that was enlightening, so I will pass it on.

A couple of decades ago, rare earths were mined in the US, Russia, Australia, South Africa, and a few other nations, including China. China started developing her mines and they, like most developing businesses in China, were heavily state supported. These mines, when they came online, were able to undercut their competition. Eventually China had enough mines producing to supply the world market. The companies that owned mines in other nations gradually shut those mines down, or in some cases sold them to the new Chinese mining companies.

Now China monopolizes the market and the increased demand there for rare earths has led to a policy of “China first”, which the other nations think is hoarding and a preditory trade practice under the World Trade Organization rules, but China has gotten away with all the other moves in this market because there were few regulations and those in charge of those few were asleep at the wheel.

The new spin is that if China hoards, the economics will allow those former producers to reopen mines or to develop properties that were uneconomical when China was cornering the market. So the shortage will last less than five years before China has many new competitors.

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