EDITOR: | February 28th, 2013

The Pulse: Upsetting the rare earths apple-cart; Lynas report card; Potash leagues table

| February 28, 2013 | No Comments

Pulse-Robin-BrombyTwo points to ponder for the rare earths industry (and its investors). One, there may be no rare earths exports from China in the not too distant future. Two, delays in hybrid car plans may mean lanthanum demand is higher than expected, which would be good news for the LREE sector.

These are the thoughts of the world REE expert Dudley Kingsnorth, now a professor at Perth’s Curtin University. In respect to the first point, he says it is now clear China is heading for full vertical integration of its rare earths industry, recently typified by the push in Baotou Iron & Steel to expand its magnet production so that output equals its rare earth oxide production. In the near future, he says, you won’t be able to buy rare earths from China; instead, you’ll have to buy their electric motors and other downstream products. It’s all about social harmony and employment: rare earth mining won’t create millions of jobs, but downstream industries using those elements will.

Not only is this happening with Baotou, the state-owned rare earth enterprises in southern China are also pushing for full integration. Soon they will not have available for export their rare earths oxides: those will all being going to new electric motor and light factories. This development has become obvious in the past three or four months, says Kingsnorth.

This is a critical move when you consider that, for all the money and effort expended on new projects in the West, China is still providing 90% of the world’s rare earths.

His other point is that Toyota has again postponed installing lithium-ion batteries in its Prius. This was to have happened in 2014, then that was pushed out to 2016 – and now it’s going to happen in 2018. Kingsnorth says this could change the outlook for lanthanum demand with the car maker sticking for longer with the lanthanum nickel hydride battery. That could be good news for emerging light rare earths producers, he adds.

Incidentally, The Financial Times today is reporting that Boeing says it has solved the problems with the lithium-ion batteries that led to the grounding of the new 787 Dreamliner planes.

RARE EARTHS: Analysts at Deutsche Bank are still being cautious about Lynas Corp after the company produced the first rare earth samples from its Malaysian plant. The firm is maintaining its “hold” recommendation on the stock. The client note says Lynas has produced both HRE-SEG carbonate (samarium, europium, gadolinium, terbium, dysprosium) and Lanthanum/Cerium carbonate which are both separated out at the end of solvent extraction stage 5 (SX5), while further separating is now going on in SX6. “We assume that there is now an average two month period to first sales following shipping and product testing. While we are starting to see limited downside, we maintain our Hold rating given there is uncertainty around pricing and the plant needs to ramp up to 11ktpa (11,000 tonnes a year),” the note said.

Deutsche does not foresee the upcoming elections in Malaysia affecting the status of the Lynas operation.

POTASH: It may be time for a fact update. The latest U.S. Geological Survey reports lists mine production and reserves in relation to potash. I’ll rank them; this could be a useful table to file. Hope it’s of some use. All figures are in tonnes.

First, the reserves league:

4.4 billion tonnes
2 Russia 3.3 billion tonnes
3 Belarus 750 million tonnes
4 Brazil 300 million tonnes
5 China 210 million tonnes
6 Chile 210 million tonnes
7 Germany 140 million tonne
8 United States 130 million tonnes
9 Israel 40 million tonnes
10 Jordan 40 million tonnes
11 United Kingdom 22 million tonnes
12 Spain 20 million tonnes

OK, so here now is the ranking for production in 2012:

1 Canada 9 million tonnes
2 Russia 6.5 million tonnes
3 Belarus 5.65 million tonnes
4 China  3.9 million tonnes
5 German  3 million tonnes
6 Israel 1.9 million tonnes
7 Jordan 1.4 million tonnes
8 United States/Chile 900,000 tonnes each
9 Brazil 460,000 tonnes
10 UK  430,000 tonnes
11 Spain  425,000 tonnes



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