EDITOR: | April 11th, 2018 | 5 Comments

Trump, Tesla and an increasing appetite for rare earths

| April 11, 2018 | 5 Comments
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Last month we discussed that China was supporting its downstream industries, including a pigment project in Inner Mongolia. This month, we learn that China is again providing subsidies to separation companies. Minmetals is the latest recipient of such a subsidy, in the form of a tax return bonus to one of its subsidiary companies. Meanwhile, China is continuing its zero-tolerance policies with respect to illegal mining, dispatching more than 40 law enforcement officials in Guangxi over the past month. These efforts are starting to pay dividends as prices have increased; the average unit price of China’s rare earth exports have increased 11.9% y.o.y to $51.9/kg in February.

Outside of China, there have been no major changes to fundamentals that are too noteworthy. Again, the biggest mover of markets is Trump. Last month, the President’s infrastructure spending plan with the goal of shortening the average processing time for permitting was the headline. Now, Trump has begun a tit-for-tat trade spat, enacting significant trade tariffs against the import of steel and technology from China. Rare earths and other raw materials have so far been left unscathed; however, the concern is that China will start to levy a tariff on its rare earth elements. If this were to occur it could spell disaster for automakers who are heavily reliant on China for their rare earth requirements.

Last time China limited rare earth exports, it was brought to task by the US, Japan and the EU, and by 2012, China’s policies were rebuked by the WTO. This time, given that the US has started the war, the WTO may have less sway.

Meanwhile the US is wholly focused on limiting its reliance on imports to meet its own critical metal demands. For a while now, the Departments of Defence and Energy have invested in studying the potential to extract rare earths from coal. Ucore has now signed a MoU with Kentucky River Properties to extract rare earth elements from its coal fields. It is estimated that concentrations of rare earths are around 300+ppm.

Aside from Trump’s trade war, there hasn’t been too many changes outside of China to the rare earth situation. There is definitely more appetite for rare earths than there’s been in a while. Rare Earth Salts confirmed to Core Consultants that they have buyers and all they need to do is increase output. It seems many suppliers are in a similar boat. Medallion Resources has indicated that their test work is underway and results are producing a cerium-depleted 41.6% concentrate of the much coveted magnet metals, neodymium and praseodymium.

Looking at the end user market, interestingly we found that for the longest time, Toyota has been trying to reduce rare earths in its electric vehicle motors, or at least limit its requirements for the more expensive, rarest types. Tesla, bucking the trend as always, has adopted the complete opposite strategy, increasing its reliance on neodymium and permanent magnets.  The car make plans to shift its Model 3 Long Range car motor to neodymium. Last year, neodymium prices climbed 40% to $70/kg. The demand for this metal is expected to rise around 8.5% per annum.

Note: Extracted from the Core Consultants’ Rare Earth Monthly Report.


Editor:


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Comments

  • Tracy Weslosky

    OMG – I could not love this artwork more if I tried — thank you Sharron. And Lara, yes — we all have an appetite for rare earths, and I am absolutely thrilled that both ARAFURA and ALKANE RESOURCES will be attending our upcoming 7th annual InvestorIntel Summit at the King Edward Hotel on May 3-4th.

    April 11, 2018 - 1:38 PM

    • Lara Smith

      Great news that ARAFURA and ALKANE attending the Summit-ones to watch

      April 11, 2018 - 1:40 PM

  • Joe O

    Alkane would be nice to finally see some progress Been holding for awhile arent they due to announce some offtake agreeements soon? Maybe they should call ucore re: MRT? (Thats for Mr Ainsworth LOL)

    April 11, 2018 - 6:16 PM

  • Tim Ainsworth

    Lara, your data “the average unit price of China’s rare earth exports have increased 11.9% y.o.y to $51.9/kg in February.” actually refers to exports of rare earth permanent magnets, which are also +27% YTD volumes @ 5,280t.
    As we all know ROW exports contain high proportions of low value catalyst materials, particularly La to US, in reality China’s average YTD export price for rare earths was US$8.2/kg for the same period.

    April 12, 2018 - 9:13 AM

  • Lara Smith

    @ Tim Ainsworth Thanks Tim, as indicated in the report- we use a basket price to determine average export price and yes this is based on customs data. In our full report each month we provide actual spot transaction prices over the month for each metal and oxide both domestic and FOB prices, as well as examine customs data-the export volumes and values

    April 12, 2018 - 9:29 AM

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