Jack Lifton’s Analysis and Forecast for the Rare Earth Sector in 2014
Today, December 31, 2013, at least 80% of the demand for the light rare earths, in the form of ore concentrates, is in and from the domestic Chinese market. Essentially 100% of the demand for the heavy rare earths, as ore concentrates or in process leach solutions, PLS, comes from that same, domestic Chinese, market.
I strongly believe and therefore maintain that so long as the majority of the demand for each of the individual rare earths, in raw material configurations, comes from mainland China, the Peoples’ Republic of China,( the PRC ), then the only logical business model for a rare earth mine or a rare earth junior miner is one that first of all emphasizes and targets the demand for its products in the PRC, and creates an ability to market there, in competition on price, with domestic Chinese rare earth producers of the exact same products. Such an ability, of course, would make a rare earth miner or junior miner a sure winner in the non Chinese market, since its delivered prices would be much lower than those of its Chinese competitors.
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I am writing these sentences on December 31, 2013, and unless the business model outlined in bold italics above is followed by ventures outside of China in the next twelve months, and unless total rare earth supply chains, competitive, both inside and outside of China, with existing Chinese total rare earth supply chains are created, or planned and funded outside of China in that same twelve months, then the overwhelming majority of demand for each of the individual rare earths in raw material configurations as of December 31, 2014, will again be in the domestic PRC market. This situation will remain static until and unless a competitive total rare earth supply chain is established outside of the PRC.
This, of course, means that the pricing for rare earths in raw material configurations will continue to be determined by the PRC’s domestic market, the demand for the supply of rare earths into which is the pricing driver. So long as foreign rare earth producers can produce only the light rare earths, all of which the Chinese market has in surplus from domestic sources, they, the foreign sources, will be only successful if they can sell at a profit into the Chinese domestic market competitively. As of this moment domestic Chinese prices are such that there is no driver at all for Chinese rare earth processors or end users to import light rare earths individually or in combination from the universally higher cost foreign producers.
There will always be a small market outside of China for light rare earths produced outside of China where the buyer is factoring in a security of supply component of the cost, but this is not likely to be a large market or any market at all until there is a total rare earth supply chain outside of China especially in the cases where the customer requires high purity separated individual rare earth such as for the production of rare earth permanent magnets.
The heavy rare earths’ market is the one to watch and the one in which to invest…To read and receive the full copy from Jack Lifton’s Analysis and Forecast for the Rare Earth Sector in 2014 — click here to subscribe
Jack Lifton is the CEO for Jack Lifton, LLC and is a consultant, author, and lecturer on the market fundamentals of technology metals. Technology metals ... <Read more about Jack Lifton>