EDITOR: | September 28th, 2013 | 12 Comments

Professor Dudley Kingsnorth weighs in on Molycorp, Lynas and his latest rare earth market forecast

| September 28, 2013 | 12 Comments
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Dudley Kingsnorth and Ian Chalmers with Dudley's Car

Photo taken by Tracy Weslosky: Ian Chalmers of Alkane Resources (L) and Professor Kingsnorth (R) showing his license plate

I would like to start this piece with a special thanks to Professor Dudley J. Kingsnorth of the Curtin Graduate School of Business, Curtin University; and through the Industrial Minerals Company of Australia Pty Ltd (“IMCOA”) who has graciously written our audience with an update on the rare earth market after just returning home from two weeks in China in time to see his Fremantle Dockers in the AFL Grand Final yesterday…

He starts with an important disclaimer that the rare earth market is complex and one that cannot be concluded in a simple statement. Due to the volume of relevant information and data, the following is quoted verbatim and below his letter you may access his most recent presentation China’s Industrial Minerals and Markets Conference.

Professor Kingsnorth writes: “…I do firmly believe that, with Mountain Pass (Molycorp) and Mt Weld (Lynas) coming on-line, that there is renewed confidence in the market on the part of consumers which is leading to a rejuvenation of the market. In essence, my position has not changed much over the past 6 months or so, but in identifying the difficulties that the suppliers face it is beholden upon me to identify the upside that is possible, but not a certainty…taken in context, as I believe your readers do, it should be seen as laying out the broad landscape that is the future.”

Highlights of his recent talking points at numerous conferences in China include the following on demand highlights:

  • Demand in 2016 (±20%) 160,000t REO
  • Demand in 2020 (±30%) 210,000t REO
  • With the advent of LEDs the demand by the phosphor sector is weak.

Supply side highlights:

  • Supply in 2016 (±20%) 180,000t REO
  • Supply in 2020 (±30%) 250,000t REO
  • HREEs will be in short supply, particularly in ROW

Professor Kingnorth goes on to write:

  • Chinese rare earths suppliers are nervous about the advent of Mountain Pass and Mt Weld and have real concerns about an oversupply of LREEs, which will lead to low prices.
  • Over the past few months and weeks both Molycorp and Lynas have stated that while they will commission their new facilities, to full Stage 2 design capacities within the next year or so, it will take time for the market to absorb that capacity, some 60,000tpa REO, and accordingly it may be some time before they operate at those capacities on a continuous basis.
  • For LREE consumers we are entering a new era with a relative abundance and diversity of supply. I believe that with this new confidence that we will see the development of new applications and increased consumption of existing applications. SorbX by Molycorp is a prime example. Less focus on replace, reduce, recycle.
  • Under the above conditions the market cannot accommodate another LREE project until 2017/18 at the earliest. In fact it is my view, based on the time Molycorp (>50 years’ experience) and Lynas (>50 years’ experience through Rhodia/Solvay Agreement) have taken to design, get approvals, raise funds, construct and start-up that we will not see.
  • A major focus remains the identification and construction of new HREE projects – both in China and particularly in ROW. What about the upside – noting that there was no probability placed on this eventuating, but it is certainly much less than 50:50.

There are several potential developments on the demand side:

  • Continued and growing use of LaNiH batteries, rather than the rapid replacement by Li-ion batteries as seen by many. The jury is still out on this one.
  • High growth in demand for cerium-based chemicals for water and waste treatment.
  • High growth in demand for rare earth magnets (15-25% p.a.) if it can be available at <US$75kg REO – noting that this could entail selective mining of those deposits that have higher Nd content. This potential demand cannot drive overall demand alone as at this price it does not support the production of Nd alone.
  • The Perfect Day – it is a good event so it is not the perfect storm!! – is if the above 3 market developments occur simultaneously, then demand may exceed 250,000tpa REO for the first time in 2020.

Professor Kingsnorth comments at the end of his letter with regards to the above “…is an honest attempt by me, based upon my knowledge and experience, to lay out some of the future scenarios. I am not asking anyone to plan on this potential scenario, but just to consider taking it into account in their forward planning. Comment is welcome.”

Special courtesy, Professor Dudley J. Kingsnorth’s recent presentation from the China’s Industrial Minerals and Markets Conference.

Download (PPTX, 1.48MB)


Tracy Weslosky

Editor:

Tracy Weslosky is the CEO of InvestorIntel Corp., a company that publishes InvestorIntel.com. A leading source for investors, entrepreneurs and industry leaders alike, InvestorIntel is ... <Read more about Tracy Weslosky>


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Comments

  • Veritas Bob

    1. Prof. Kingsnorth wrote: “Over the past few months and weeks both Molycorp and Lynas have stated that while they will commission their new facilities, to full Stage 2 design capacities within the next year or so,” I don’t believe this is correct with regard to Molycorp. Molycorp previously stated that Project Phoenix Phase 2 would be mechanically complete by the end of 2012 and woudl be commissioned by mid-year 2013 (whether or not it was actually run at the Phase 2 40,000 tpa rate). However, in the last three (the post former Molycorp CEO Mark Smith) quarterly earnings conference calls (in March, May, and August of 2013), Molycorp has indicated that completion of Phase 2 capability itself, has not yet been decided, and this is due to Molycorp trying to keep down capital expenditures in light of liquidity concerns – a decision whether to expend the remaining capex to achieve Phase 2 capability has been deferred.

    2. Does Prof Kingsnorth have a view on the possibility and timeframe for cerium-based magnets coming onto the market, and what that would do to cerium (increase) and neodymium (decrease?) demand?

    September 28, 2013 - 1:23 PM

    • Dudley Kingsnorth

      1. I still stand by my statement that ..”they will commission their new facilities, to full Stage 2 design capacities within the next year or so”. Taken in the broader context “a year or so” could be early 2015, by which time, given some success with SorbX, Molycorp will be likely to have or be completing commissioning of Phase 2. Please note that this is a personal view based on my assessment of the market and the fact that Molycorp has invested significant capital funds to date, which they will wish to ‘put to work’ as soon as feasible.

      2. Refer to comments to others.

      October 3, 2013 - 12:07 AM

  • Yves1

    In slide 6 of the Prof. Kingsnorth presentation listing growth per application, it is mentioned Gd as being potentially used in magnetic refrigeration. I am not too sure Gd has still the favors of industrialists.
    Cooltech in France should release by the end of the year 2013 their first industrially produced refrigerated counter running with a Fe-Si-La alloy as the magnetocaloric element (hence no Gadolinium but Lanthanum ). The magnetic field is generated by rotating permanent magnets.
    Camfridge in England is working I think on similar technologies with Whirlpool to release home fridges using magneto caloric effect by the year 2015.

    September 29, 2013 - 10:12 AM

    • u4eah

      > Yves1 , that pretty much summarizes my research findings/take on “the Magneto-Caloric effect” <

      – The whole refrigeration / cooling industry is about to be revolutionized; …everything from air-conditioning your home; your car; household fridges/freezers; plus massive myriad of industrial usages/implications !! …………..well, you get it !

      – You see; to Researchers, Gadolinium had been the enabler metal of choice, for the rollout of this leading edge technology; …that is until skyrocketing 2011 REE prices coupled with scarcity/availability concerns; removed gadolinium from the roster ! Lanthanum, on the other hand; predicted to be in global over supply, and cheap; makes it the ideal replacement; with some manageable trade-offs in performance of course !

      – In addition to being more "Eco-Liko" ,(no hydro-fluoro whatever chemicals); the uptake of this new technology on a world-wide basis, has massive implications; not the least of which boasts energy savings somewhere in the 40% – 50% Range, for the afore-mentioned.

      September 29, 2013 - 1:04 PM

      • Gareth Hatch

        Research into La-based magnetocaloric materials was long underway before the recent REE price spikes.

        A key barrier / challenge to the rollout of magnetic refrigeration is being able to produce the device or assembly that generates the required magnetic field, at a reasonable price. The stronger the magnetic field and field gradient, the more effective the device – but the more expensive the machine. Generating those types of fields is not cheap, especially if you use Nd-Fe-B-based permanent magnets.

        September 29, 2013 - 1:13 PM

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  • merlion

    “Under the above conditions the market cannot accommodate another LREE project until 2017/18 at the earliest. In fact it is my view, based on the time Molycorp … and Lynas … have taken to design, get approvals, raise funds, construct and start-up that we will not see.”

    Tracy, this bullet point in the bottom portion of your post does not read clearly. Something is missing at the end of the sentence. Could you correct it, please?

    September 30, 2013 - 7:26 PM

    • Dudley Kingsnorth

      To complete: In fact it is my view, based on the time Molycorp … and Lynas … have taken to design, get approvals, raise funds, construct and start-up that we will not see another new LREE project in production until 2018/19

      October 2, 2013 - 11:59 PM

  • blackjack

    Lynas is a functioning LAMP and near complete LAMP 2 albeit having teething problems and so they may have a good start on Moly.
    One thing many have forgotten is Lynas’s ace in the hole with its Crown holdings – HREE’s and I will keep mentioning this as it was once told at a meeting that it was worth 500 billion dollars

    October 1, 2013 - 5:36 AM

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  • Molyesta

    Mr. Kingsnorth could you see Moly buying a HREE junior in the near future?

    October 3, 2013 - 10:43 AM

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