EDITOR: | November 3rd, 2014 | 9 Comments

Weslosky interviews Lifton on the rare earth struggle between Japan and China

| November 03, 2014 | 9 Comments
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Weslosky-Lifton-REEStruggleNovember 3, 2014 — Tracy Weslosky, Editor-in-Chief and Publisher of InvestorIntel and Jack Lifton, Founding Principal of Technology Metals Research (TMR), LLC talk about the increasing hostility hostilities between Japan and China over patents and the fact they are using US Courtrooms as the arena for their resolution. Jack met members of the Chinese Rare Earth and Magnet Alliance in Chicago, along with representatives of seven magnet manufacturing companies and their respective lawyers.

Jack says that, after a short discussions, the lawyers told him rather clearly that their purpose in pursuing litigation is to “block and overturn the Japanese Patent Center’s banning all Chinese magnet manufacturers from entering the high-volume business in North America.” The point of the dispute, therefore, noted Jack is nothing less than marketing. The lawyers confirmed this and added that once their goal is achieved “we will open independent offices and we hope to open actual manufacturing sites outside of China – within North America.” While this issue is not discussed often, says Jack, it has the Japanese very worried. The lawsuits brought on by Chinese companies are actually doing very well in the Courts and some rulings, at first favorable to Japan, have been overturned. Even such industrial giants as Hitachi have refused to litigate, granting the Chinese companies the right to manufacture as intended. Nevertheless, China’s impetus is strong and they want to intensify their struggle this year. And – says Jack – the point of all this is for Chinese companies it represents an impediment to the future development of our domestic rare earth magnet industry.

China already has access to raw materials and “they already are low-cost producers.” Jack notes that “time is running out for American rare earths producers as China is proving to the world that they are far more concerned about the Japanese than the Americans: “the Chinese and Japanese are battling for this market: we still have a chance to grab some of it, but time is wasting!” Jack also ponders on the role of Molycorp and Lynas in the rare earths industry and, ultimately, he asks whether they consider Lynas to be a friend or an enemy. The rumor is that Lynas is supplying didymium to Japanese manufacturers. Meanwhile, Molycorp has considerable interests in China through their Magnequench and Neo divisions. This means that the Chinese do not necessarily see the latter as competitor. As for Lynas, Jack thinks that the Chinese are concerned and fighting it. Nevertheless, Jack is very optimistic about a number of North American rare earths plays advancing their projects and states that if his three leaders were to enter production tomorrow: “…there still would not be enough rare earths to supply the US market…” — to hear the rest of the interview, click here


Tracy Weslosky

Editor:

An accomplished entrepreneur and corporate finance professional, Tracy Weslosky is the CEO for InvestorIntel Corp. and the VP of Business Development for Bellotti Capital Partners ... <Read more about Tracy Weslosky>


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Comments

  • Tim Ainsworth

    Bizarre commentary given Lynas’s survival has been totally dependent on NdPr & SEG/HRE sold into China past 18 months. Particularly the off spec stuff.

    November 4, 2014 - 9:11 AM

  • Jack Lifton

    Tim,

    How do you know that? And please note that off-spec stuff has to be re-refined to be used, so it sells, if at all, at a steep discount. Are you aware of the fact that Lynas’ plan was to be a supplier to non-Chinese operations. Do you really think Lynas can be a supplier of ice to the Arctic? Who is being bizarre here?
    And it is not a secret that Lynas SEG and HREE concentrates, which are 5% of the total of its separated materials are shipped to La Rochelle France for refining by Solvay. This is a contractual relationship. I was present at the LAMP when the first 200 kg of “products” were produced, and I was at La Rochelle the day that the first shipment of SEG and HREE concentrate arrived there for refining!

    November 4, 2014 - 3:18 PM

  • Chris

    A few points that can be clarified.
    -Lynas is supplying didymium to Japanese customers.
    -Lynas was producing and selling off spec and/Pr at deeply discounted rates.
    -Lynas supplies REO into China.

    “Lynas confirms its commitment to supporting high growth Japanese industries as they seek to diversify their Rare Earths supply sources, in accordance with the agreements that were announced on 30 March 2011. In addition, Lynas will provide additional assurances regarding prioritized Nd/Pr supply from the LAMP to the Japanese market.”
    https://www.lynascorp.com/Announcements/2014/ASX%20Announcement%20Senior%20Debt%20Facility%20Update%2024%20Sep%202014.pdf

    “Lynas products are sold to customer involved in high technology, high growth future facing industries in Japan, China, Vietnam, Europe and North America.”
    https://www.lynascorp.com/Annual%20Reports/Annual%20Report%202014.pdf

    “Product which does not meet customer specification typically has to be cleared at a substantial discount. In this quarter (Q3 2014) we cleared 109 tonnes of off specification NdPr.”
    https://www.lynascorp.com/Quarterly%20Reports/2014/Quarterly%20Report%20-%2015%20Oct%202014.pdf

    November 4, 2014 - 4:28 PM

  • Tim Ainsworth

    Lynas was well aware of the current virtual monopoly situation back in 2012: https://www.lynascorp.com/Presentations/2012/Roskill_Presentation_14_Nov_2012__FINAL.pdf

    At steady state one presumes/hopes La Rochelle will be the ultimate destination for LAMP SEG/HRE, but to date it has not been operating at steady state.

    Page 7 graphic 2013 AR clearly shows a single magnet stream from LAMP to China, and interestingly then on to Japan. I understand that was not an “artists impression”. https://www.lynascorp.com/Annual%20Reports/Lynas_Annual%20Report_2013%20FINAL%201272078.pdf

    Wonder where the NdPr chloride that fell off the back of a truck was headed?
    http://www.thestar.com.my/News/Nation/2014/03/28/Chemical-spill-road-closure-Lynas/

    “we have delivered a step change in quality for NdPr in the quarter. 99% of NdPr has been produced to specification since mid-August. This compares to 48% at the beginning of the quarter. This is significant. Product which does not meet customer specification typically has to be cleared at a substantial discount. In this quarter we cleared 109 tonnes of off specification NdPr.”
    https://www.lynascorp.com/Announcements/2014/Quarterly%20Report%20-%2015%20Oct%202014.pdf

    Interestingly the revised finance terms from JOGMEC included: “Strengthened commitments to supply the Japanese market.”
    “Lynas will provide additional assurances regarding prioritized Nd/Pr supply from the LAMP to the Japanese market”
    https://www.lynascorp.com/Announcements/2014/ASX%20Announcement%20Senior%20Debt%20Facility%20Update%2024%20Sep%202014.pdf

    Perhaps things are finally coming together but hard not to believe that China could have snuffed Lynas (or Moly for that matter) out at whim with a simple imposition on Nd imports.

    November 4, 2014 - 10:46 PM

  • Paul

    “Wonder where the NdPr chloride that fell off the back of a truck was headed?”

    According to this, Japan.
    http://www.thesundaily.my/news/1001141

    November 5, 2014 - 4:38 PM

  • Tim Ainsworth

    “ice to the Arctic?” > Lynas AR covering the 12 months to June 30 2014, page 55, 6. Segment reporting:
    “Revenues by geographical location, based on invoicing as a percentage of total revenues comprise; Japan 58%, China 22.1%, France 10.1%
    and all others 9.8%.”
    I’ll suggest the China percentage was even higher H1, but likely to further reduce as they improve consistency in filling contract specs.

    November 7, 2014 - 3:10 AM

  • Chris

    I do believe Mr Lifton just got schooled on Lynas.

    November 8, 2014 - 2:34 AM

  • Tim Ainsworth

    “Do you really think Lynas can be a supplier of ice to the Arctic? Who is being bizarre here?”

    Jack, patiently waiting your mea culpa on that one, particularly post Lynas Dec QR confirming contracted PrNd customers into China.

    Frankly incidental to the HRE mantra you have perpetuated, Kingnorth’s verboten data suggests they are currently 200% oversupplied and demand is static at best, JL Mag forecasts DyO demand falling 50% 2014 > 2019, Tracy’s “myth”.

    Should you bother to respond some hard data rather than “Jack said” would be appreciated, after all you are in possession of the same data from Roskill’s 15 that, happy to draw further inference,

    March 4, 2016 - 11:17 AM

  • Jack

    Tim,

    If enough “experts” say it, or better, write it then it must be correct, right? Roskill begat Dudley and Dudley begat data and you are a true believer. Why don’t you fly to Japan, China. SINGAPORE, and Malaysia and actually buy and sell rare earth’s for a while and then give us your sarcasm with some basis in fact and ecperience.

    Jack

    March 4, 2016 - 4:06 PM

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