EDITOR: | August 15th, 2013 | 10 Comments

Confessions of a Rare Earth pundit wannabe

| August 15, 2013 | 10 Comments
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Time for a bit of self-humiliation, I think. The great British writer and pundit Paul Johnson not so long ago wrote this piece of advice: if you are worried about something, jot it down in your diary. Then go back to that entry two years later and you’ll usually find it was a ridiculous worry. On the contrary, journalists should never look back at what they have previously written; the chances are they got it wrong.

But, ignoring my own advice, let’s look at something I penned in March 2011. Just after the Fukushima disaster had set off jitters about Japan’s economy, I worried about how this would affect demand in that country for rare earths. There was mistake No. 1. The economic issue never really impacted too greatly; it was there, but was not the real reason Japanese demand tanked. That was caused by the “reduce, replace and recycle” policy Japan adopted in order not to be a hostage to (a) Chinese control of supply and (b) Chinese setting high prices as a result. So here, from March 2010, are the reasons I argued why Japanese demand would remain robust and the prices of REE would not be all that impacted.

Reason #1: I said “Japan is China’s single largest customer for REE, so you might have expected prices to take a tumble since the earthquake-tsunami-nuclear melt down. There is no evidence of this.” Well, tumble they did. Defending myself a few months later, I wrote: “I don’t think it is at all clear that problems in Japan have been the prevailing influence, otherwise we would not have seen Japanese corporates announcing plans to locate plants in China in order to guarantee access to REE. It is more likely that some prices have fallen due to a change in the supply-demand balance and the anticipation of the opening of Mt Weld and Mountain Pass (affecting the lights, particularly).”

Well, actually, that was not so far off the mark. Where I did get it wrong was assuming, a few months later, that the global economic woes would see a severe dive in demand for hybrid/electric cars.

Reason #2: I said “The talk is that Japanese reconstruction will cost somewhere north of $200 billion. Much of that will be in the form of cement, copper, iron ore, and so on. But some of the money will be spent on technology for which REE are vital.” Alas, no evidence has emerged that supports the view I expressed.

Reason #3: “There are many items involving REE where demand is not contingent on strong economic growth, and wind turbines is one.” Whew! Not too far off the mark; after all wind power has continued to expand.

Reason #4: “The military demand will remain strong. REE is needed in guided missiles and smart bombs — which will need more replacements after the Libyan intervention. But REE are everywhere in our weaponry and systems.” Probably wrong. What is interesting to note is that, in the intervening period, the issue of REE supply to the military has not been one that has garnered much attention. Indeed, while rare earths have featured on various “risk lists”, so have antimony, beryllium, tungsten and others.

Reason #5: “There are reports that China may start importing REE because its own production cannot satisfy domestic demand. That all suggests a very tight supply-demand balance globally.” Goodness, well off the mark there.

Reason #6: “You and me, and people like us. We want the latest tech toy, the latest designs of hybrid car, the best widescreen television we can afford, a new cell phone. We want all the technology that we can get, and much of it is dependent on REE.” Mmm — again, like the military issue, this has not been one that we commentators have thought much about since.

And, oh dear me, a few months later I opined that it was likely that the “reduce, replace and recycle” effort would be shelved. No: instead they have all gone on, along with Japanese plans to extract REE from the seabed. Wrong again.

Others were more on the money. In early 2012, there was a good deal of reporting on the likelihood of China running out of some rare earths, even by as early as 2015. Fortunately, I asked Dudley Kingsnorth at the time and included his email response in my April 2012 posting.

“The idea that China will not be able to meet its own rare earths needs in the near future is fanciful nonsense,” he writes. His case was that the country has between 30 million and 50 million tonnes of REO reserves; it has between 200,000 and 250,000 tonnes a year of processing capacity (admittedly 50% of which is presently shut down but the equipment is there and available. Furthermore, said Kingsnorth, cash-rich state-owned enterprises had announced multi-million dollar REE expansion plans, with Fujian province unveiling a $905 million project based on its HREE reserves. From calculations he had done, it appears that between 20 million and 30 million of reserves had suddenly been “lost” in a year when prices have tripled. For him, the figures clearly did not compute. And he concluded: “Above all, China’s policies are driven by the need for social harmony, so believe me they will find the rare earths needed to sustain the high technology manufacturing industry that is dependent on rare earths and employs millions of people”. Dudley, needless to say, has a far sounder record than this correspondent.

And then, like any reporter, I got excited about things that — well — about which I should probably should have been more circumspect.

In July 2011 I posted that Radio Australia, the shortwave service based in Melbourne and broadcasting to Asia, was one of several sources to indicate that South Korean companies are looking to Burma (Myanmar) as a possible source of REE. South Korean officials had recently been to Rangoon ahead of the two countries starting a geological survey to identify deposits.

Well, that was just passing on a tidbit. But I also got excited with the news that South Korea could look forward to mining REE from its own soil after the Korea Institute of Geoscience and Mineral Resources found traces in Hongcheon, Gangwon Province, and Chungju in North Chungcheong Province. The institute began analyzing samples from 11 locations in the nation from last year. The institute said in a release that Chungju contained 71,500 tonnes of REE while Hongcheon held 78,000 tonnes. It was not made clear whether these were contained tonnes, or the total of REE-bearing ore. Given that in 2009, the country imported 2,655 tonnes of rare earth oxides, such a discovery would have considerable significance, I added.

Yes, but we seem never to hear much more about that. Hold the excitement.


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Comments

  • Ashley

    What’s the reason for this article?

    August 15, 2013 - 6:50 PM

    • Robin Bromby

      Really?

      Ashley — given that commentators and analysts are always opining on future trends, this was intended as a (slightly light-hearted) reality check. Was I really that obtuse?

      Thought it would also make a break from the flow of technical data and brighten someone’s day. Clearly not so.

      August 15, 2013 - 7:02 PM

      • Dr.Copper

        Mr. Bromby, the future is here already there is no need
        to worry it will reveal itself in due time.

        Take for instance here the conceptual design of the future
        ocean carriers which among others is a great contributor
        to today’s pollution and remember the air is cleaner in
        Beijing today than it was in 2008 because cleaner coal
        is being imported.

        http://m.youtube.com/watch?v=vlcdftDWTDM&desktop_uri=%2Fwatch%3Fv%3DvlcdftDWTDM

        August 20, 2013 - 1:29 PM

    • Tracy Weslosky

      Ashley – this wins for most inane questions of the week…

      August 16, 2013 - 10:20 AM

  • Dan

    Robin, it brightened my day. In today’s society we are so concerned with the present, I enjoyed the look back and the look forward.

    August 15, 2013 - 8:36 PM

  • Sterling

    Good comments Robin, respecting the past is certainly valuable and warranted. If only the analysts from banks and brokerages would do the same!

    August 15, 2013 - 9:22 PM

  • Tracy Weslosky

    You are actually right on Reason #5: “There are reports that China may start importing REE because its own production cannot satisfy domestic demand. That all suggests a very tight supply-demand balance globally.” — just wait till you see the interview we post from China this next week….your looking good Robin!

    August 16, 2013 - 12:22 PM

  • Jim S.

    This was a very refreshing article. Nice to see those that analyze/predict looking back not just forward. I always enjoy your pieces and find myself reading on subjects out of my comfort zone as I always know that you will inform and engage.

    August 16, 2013 - 1:14 PM

  • Bob M

    Great article! Should be mandatory for all pundits.

    August 20, 2013 - 12:46 PM

    • Tracy Weslosky

      Robin’s piece was the 2nd most read article of last week…so indeed, others agree! Thank you for your comments.

      August 20, 2013 - 12:51 PM

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