EDITOR: | March 18th, 2020 | 6 Comments

Catching the world with our rare earths contingency pants down

| March 18, 2020 | 6 Comments
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The rare earths market has had its ups and downs the past few years. In particular, the US-China trade war brought a new focus to the sector highlighting the world’s dependency on China for rare earths supply.

Then in early 2020 with much of China closed down by the coronavirus the Chinese rare earths supply was put to test. While the Chinese market is often quite opaque, market pricing for key rare earths such as neodymium give an indication of the supply and demand dynamics.

Key rare earths price movements in 2020 as the China disruption was taking place

Neodymium (Nd) prices are up 4.28% so far in 2020, despite the slowdown in industrial production of goods that contain neodymium. Asian Metal reports praseodymium (Pr) prices are slightly down in 2020, and dysprosium (Dy) prices are up ~5% over the past 2 months.

Neodymium 5 year price chart

Source

All of this suggests that despite the coronavirus chaos in China the key rare earths market remained very stable. It would appear from this that China’s inventory was adequate to cover any mining disruptions; however, demand was also lower due to the industrial slowdown.

Experts view

In this exclusive February 18, 2020 InvestorIntel video, rare earths expert Jack Lifton discussed with Tracy Weslosky the impact the coronavirus is having on critical metals:

Jack Lifton states:

“(China) Shipments could stop at anytime……logistics are compromised…..The coronavirus has caught the West with its contingency pants down…….this is a warning bell for everyone in the world.”

Jack also revealed that we do not even know if the Chinese possess enough stockpiles of rare earths to handle their own demand, never mind the needs of Americans.

Rare earths are vital ingredients for modern technology and the world relies largely on China

Source

Lynas Corporation Limited

Outside of China, the rare earths supply chain is completely reliant on one company. That company is Lynas Corporation Limited (ASX: LYC). Lynas is the world’s second largest supplier of rare earth materials, and the only significant rare earths producer outside of China. Most of Lynas’ rare earths go to long term contracts mostly with Japan. This means if we get a rare earths supply disruption from China and higher NdPr prices, then Lynas Corporation will be the key global company to benefit. This is worth keeping in mind in case we get a second wave of the coronavirus outbreak in China.

The latest news with Lynas Corporation

  • February 3, 2020 – Australian government awards major project status to new Lynas WA plant. The Lynas Kalgoorlie plant will undertake cracking & leaching of rare earth concentrate from Lynas’ Mt Weld mine, which is also located in Western Australia’s Goldfields region. Lynas will also explore opportunities for additional processing in Kalgoorlie.
  • February 27, 2020 – Lynas Malaysia operating license renewed for three years.

The good news here for investors is that Lynas has achieved good progress towards their new cracking & leaching (C&L) facility planned for completion by 2023. This will tie in nicely with the 3-year Malaysian license renewal given the relocation of the C&L facility to Australia should be able to be done in the 3 year time frame. This clears the cloud over the stock from 2019 when they had uncertainties over their Malaysian license renewal due to environmental concerns. This is good for Lynas and good for security of rare earths supply ex-China.

Lynas Corporation to diversify its rare earths operations under their 2025 plan

A summary of Lynas’ progress towards their 2025 plan

Source

Closing remarks

Japan recently announced they plan to stockpile rare metals as part of an effort to reduce dependence on China. Let’s hope the US and others finally get their act together to financially support the critical materials miners. This includes not only rare earths, but also the key EV metals cobalt and lithium.

The 2020s will be a decade of enormous technological advancements with AI, IoTs, robotics, electrification of transportation, renewable energy, and energy storage. All of these need a secure supply of the 35 critical materials as identified by the U.S. Government, including rare earths.

For now, the West is lucky to have Lynas Corporation, but clearly we need many more great critical materials miners and processors to help build up our severely damaged local supply chains.

As Jack said: “this is a warning bell for everyone in the world.” Western leaders please listen and let’s not get caught with our pants down!


Matthew Bohlsen

Editor:

Matthew Bohlsen is a Senior Editor for InvestorIntel.com. With a Graduate Diploma in Applied Finance and Investment, and a Graduate Diploma in Financial Planning. He ... <Read more about Matthew Bohlsen>


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Comments

  • MILAN MURPHY

    There’s no mention of Nio-Corps Corporation that is developing rare earth minerals in Southeast
    Nebraska.

    March 18, 2020 - 4:21 PM

    • C. Tostevin

      Peak resources will be a major player. SML is imminent , then it’s all systems go.

      March 19, 2020 - 12:47 AM

  • JJ

    There are plenty of ‘prospects’ out there: Medallion, Hastings, Alkane Arafura, Medallion to name a few. But Lynas will be able to meet the market demand ex-China once their expansions are implemented so it’s a bit difficult to see much opportunity for other players. Especially given the high capex to get started without relying on Chinese processing.

    March 19, 2020 - 12:30 AM

  • Tim Ainsworth

    Further, this article would suggest Japan via JOGMEC will move quickly to start building reserves of NdPr threefold, they are already sitting on significant Dy/Tb, as are their mag makers.

    https://japan-forward.com/japan-to-stockpile-rare-metals-as-part-of-effort-to-reduce-dependence-on-china/

    Back of envelope, 60 days reserve to 180 days would be from 1000t up to 3000t, or 2000t NdO/NdPr purchase over coming months/year over and above their mag maker purchases, also likely to include some stockpiling.

    Such an exercise would greatly strengthen Lynas +CF both by underpinning the current 600tpm run rate and maintaining the significant CoP benefits at the optimised rate.

    Given the PDF was approved as part of the license renewal, the political objective in harassing Lynas has blown up, Malaysia likely in greater need of a second Yen loan, reasonable to assume annual production uplift will be quietly approved coming month or so.

    March 19, 2020 - 12:35 AM

  • Matthew Bohlsen

    Thanks for the good comments. This article was just to focus on an update of the rare earths sector and to touch on the producers only. Other articles discuss some of the other rare earths juniors.

    March 19, 2020 - 2:03 AM

    • Tim Ainsworth

      Any discussion of RE hopefuls should focus on specifically who and where the metal/magnet makers are going to materialise from as customers, particularly ROW.

      The warm fuzzy “EV revolution will float all boats” is really wearing very thin, after virtually a decade of padding out glossy PDF’s. I.e. US appears to be importing near half the NdFeB it was just 6/7 yrs ago, inference they are importing a great deal more motors & assemblies, how is this to be reversed?

      Identify the specific viable customers/supply chains, then do a beauty parade.

      March 19, 2020 - 2:59 AM

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