The Pulse: Upsetting the rare earths apple-cart; Lynas report card; Potash leagues table

Pulse-Robin-BrombyTwo points to ponder for the rare earths industry (and its investors). One, there may be no rare earths exports from China in the not too distant future. Two, delays in hybrid car plans may mean lanthanum demand is higher than expected, which would be good news for the LREE sector.

These are the thoughts of the world REE expert Dudley Kingsnorth, now a professor at Perth’s Curtin University. In respect to the first point, he says it is now clear China is heading for full vertical integration of its rare earths industry, recently typified by the push in Baotou Iron & Steel to expand its magnet production so that output equals its rare earth oxide production. In the near future, he says, you won’t be able to buy rare earths from China; instead, you’ll have to buy their electric motors and other downstream products. It’s all about social harmony and employment: rare earth mining won’t create millions of jobs, but downstream industries using those elements will.

Not only is this happening with Baotou, the state-owned rare earth enterprises in southern China are also pushing for full integration. Soon they will not have available for export their rare earths oxides: those will all being going to new electric motor and light factories. This development has become obvious in the past three or four months, says Kingsnorth.

This is a critical move when you consider that, for all the money and effort expended on new projects in the West, China is still providing 90% of the world’s rare earths.

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His other point is that Toyota has again postponed installing lithium-ion batteries in its Prius. This was to have happened in 2014, then that was pushed out to 2016 – and now it’s going to happen in 2018. Kingsnorth says this could change the outlook for lanthanum demand with the car maker sticking for longer with the lanthanum nickel hydride battery. That could be good news for emerging light rare earths producers, he adds.

Incidentally, The Financial Times today is reporting that Boeing says it has solved the problems with the lithium-ion batteries that led to the grounding of the new 787 Dreamliner planes.

RARE EARTHS: Analysts at Deutsche Bank are still being cautious about Lynas Corp after the company produced the first rare earth samples from its Malaysian plant. The firm is maintaining its “hold” recommendation on the stock. The client note says Lynas has produced both HRE-SEG carbonate (samarium, europium, gadolinium, terbium, dysprosium) and Lanthanum/Cerium carbonate which are both separated out at the end of solvent extraction stage 5 (SX5), while further separating is now going on in SX6. “We assume that there is now an average two month period to first sales following shipping and product testing. While we are starting to see limited downside, we maintain our Hold rating given there is uncertainty around pricing and the plant needs to ramp up to 11ktpa (11,000 tonnes a year),” the note said.

Deutsche does not foresee the upcoming elections in Malaysia affecting the status of the Lynas operation.

POTASH: It may be time for a fact update. The latest U.S. Geological Survey reports lists mine production and reserves in relation to potash. I’ll rank them; this could be a useful table to file. Hope it’s of some use. All figures are in tonnes.

First, the reserves league:

1
Canada
4.4 billion tonnes
2 Russia 3.3 billion tonnes
3 Belarus 750 million tonnes
4 Brazil 300 million tonnes
5 China 210 million tonnes
6 Chile 210 million tonnes
7 Germany 140 million tonne
8 United States 130 million tonnes
9 Israel 40 million tonnes
10 Jordan 40 million tonnes
11 United Kingdom 22 million tonnes
12 Spain 20 million tonnes

OK, so here now is the ranking for production in 2012:

1 Canada 9 million tonnes
2 Russia 6.5 million tonnes
3 Belarus 5.65 million tonnes
4 China  3.9 million tonnes
5 German  3 million tonnes
6 Israel 1.9 million tonnes
7 Jordan 1.4 million tonnes
8 United States/Chile 900,000 tonnes each
9 Brazil 460,000 tonnes
10 UK  430,000 tonnes
11 Spain  425,000 tonnes

  1. I am not surprised that Lynas institutional support is reserved. Presently there are few analysts that have any idea how to properly assess any company in this sector. This said, I feel that we have the predictable formula of an Aussie securing a lackluster response to success.

  2. This is an interesting twist. IF Kingsnorth is right, the mine to magnet western companies will face stiffer competition from the Chinese in the future. But the best carbonate/REE oxide producers will have a better path in the future. Watch for supply contract announcements from the Western and Japanese manufacturers with Frontier and the Aussie companies (especially Lynas and Alkane) to confirm Kingsnorth’s theory.

  3. Excellent story Robin.

    So Dudley believes there may be no rare earths exports from China in the not too distant future – does that include the illegal smuggling of rare earths out of China ?

    What does Dudley mean by “in the not too distant future” 2 to 5 years ; or 1 to 3 years ????

    When that occurs where will the manufacturers operating outside of China source their heavy rare earths from (assuming Molycorp and Lynas can satisfy the demand for light rare earths)

    Which companies do you expect “world wide” have the potential to become the early heavy rare earth producers.

    Kind regards
    Bill

    • Bill

      1. Several people have commented recently that China is successfully cracking down on illegal REE mining and exporting. If this is the case, then it means that the official export figures are getting closer to what is actually leaving China. But I guess not even the Chinese authorities know the true figure for what is being smuggled.

      2. I’ll ask him about the time frame; but the implication was that be the case in fewer rather than more years on your time scales.

      3. Good question – where will the world get its HREE? As to who and when, I am not going to stick my toe in those shark-infested waters. But here’s an interesting point made last week by Gareth Hatch during his visit to Sydney: that heavy rare earths are very difficult to process, that the various elements in the HREE range have considerable chemical similarities so they’re very difficult to separate. He added that very few HREE deposits are likely to be commercially developed.

  4. Moly looks like it has more issues to deal with
    Lynas is ramping up

    with Siemens and BASF next door it looks good for Malaysia and Lynas

  5. Hi Robyn it is always a pleasure to read your articles.

    I wonder where Australia stands if we look at Potash resources as opposed to reserves?

    Is there any truth to leaking settling ponds for the mine’s wastewater at Mountain Pass?

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