More talk of REE resurgence; China’s graphite delays; New aviation fuel source
Jack Lifton may be on to something. In his interview with publisher Tracy Weslosky, the founding principal of Technology Metals Research said he believed the worst was over for the rare earths sector, that prices seemed to have bottomed and he was expecting them to come back up.
Well, the latest quarterly report from Greenland Minerals & Energy (ASX:GGG) is on the same page. As the explorer points out, prices have been in retreat since 2011 but that the market is slowly stabilising. GGG notes that several analysts are pointing to strong demand an ongoing supply concerns for the critical REE (neodymium, europium, dysprosium, terbium and yttrium).
It continues by saying that, while, globally, economic activity is slowing, the demand drivers for the critical REE remain strong growth areas. Green technologies associated with energy efficiency continue to be major drivers. It believes the demand outlook for neodymium, praseodymium and dysprosium (all used in magnets) is strong from both wind turbine and auto makers.
Of course, we are aware of these fundamentals but it is always worth reminding ourselves of the basic trends: when there are doomsayers around, it is very easy to overlook the positives, such as the fact that plenty of television sets and computer screens are still being made and sold. This means REE-phosphors such as terbium, yttrium and europium being needed, as well as yttrium for LED lighting. GGG also sees the demand for lights cerium and lanthanum being steady, although allows this sector will be impact by Lynas and Molycorp production.
Footnote: GGG will be buoyed by another recent comment from Jack Lifton: “It is becoming clear that China likely does NOT possess the world’s largest resources and reserves of the rare earths. That title, so my colleague and TMR co-founder Gareth Hatch informs me, may well belong to Greenland or Canada. Let’s call them together the North Atlantic Mineral Resource Zone”. That suggests the advent of a new power balance in the REE sector
GRAPHITE: We know all about the delays and problems China has faced in consolidating its rare earth sector. Now we are hearing reports that the same bumps in the road are being experienced by the country’s graphite industry. In fact, five years has gone by since Beijing announced it wanted mergers among the flake graphite producers in the northern province of Heilongjiang.
Get our daily investorintel update
Why is the important? Because China’s graphite mines in Shandong province, where most of the processing plants are located, are becoming exhausted. Those plants now rely on graphite being railed from Heilongjiang, a distance of around 2,000km. Supply is intermittent anyway: the Heilongjiang mines have to stop production in the depth of winter when temperatures can fall as low as −31°C. According to Syrah Resources (ASX:SYR), which has done a study of China’s graphite industry, the graphite ore at Heilongjiang is of good grade at up to 18% total graphitic content, “but the quality of the material is problematic with abundant clays being a commonly reported issue”.
It also seems that, like with rare earths with prices surges for those elements, a number of small enterprises sprang up in Heilongjiang with the surge in flake prices.
Possibly emerging producers outside China might welcome the consolidation succeeding; after all, that might lead to closure of some of the older, high cost mines and therefore China’s export total.
Meanwhile, Mozambique is growing as a graphite story. Syrah has already claimed it has world’s largest graphite resource at its Balama project in the African state; now another Australian company, Triton Minerals (ASX:TON), says its neighbouring Balama North project has produced a drilling intersection with multiple graphite zones over a length of 61 metres. The company estimates the drill core has an average 5% graphite content. The company said the result had exceeded its expectations.
TECHNOLOGY: Japan’s IHI Corp plans to mass-produce aircraft fuel derived from algae starting as early as 2018, the Nikkei Weekly newspaper reports. It notes that the biofuel is usually derived from corn or sugar cane and, in respect of the former, this has pushed up grain prices. But IHI says it can supply algae-derived fuel that would cost 10% less than existing aviation fuel. Its costs are around 500 yen (about $5) a litre, with plans to manufacture in Southeast Asia or Australia, places with the long hours of sunshine required for photosynthesis.
As the Weekly notes, fuel now accounts for about 40% of a jetliner’s operating costs and this cost is squeezing airlines’ earnings. “The number of aircraft in service around the world is projected to nearly double to some 35,000 during the next 20 years. The growth will put more upward pressure on fuel prices, which are expected to soar,” the paper adds. Industry standards allow jet fuel that is up to 50% biofuel.
InvestorIntel is a trusted source of reliable information at the forefront of emerging markets that brings investment opportunities to discerning investors.