The Rare Earth Observer reported July 19, 2021 in their top articles that The Financial Times carried this article, which is a consequent step in the development of FT from newspaper to fish & chips wrapping:
"Biden faces green dilemma in push to build US rare earths capacity"
Complete nonsense in the FT article becasue:
The US currently has one operational rare earths mine, Mountain Pass, in California. However, Molycorp, the only big rare earths producer in the country, went bankrupt in 2015, resulting in the mine’s closure at the time. The US Department of Defense is supporting the resumption of activity there by funding MP Materials, a private equity-backed company, and it has restarted excavations.
Anyone who can read an annual report a.k.a. Form 10-K knows, that China’s Shenghe Resources have been funding MP Materials with advance payments to the tune of US$80-100 million per year.
What the DoD pledged is petty cash money. Last time FT fell into the trap of a China propaganda outlet. This time FT were mislead because they believe and repeat stereotypes, often thrown around by irresponsible rare earth company executives:
Once unearthed, materials must still be sent to China for processing. We had previously listed the rare earth stereotypes. This is one of them.
The trouble with these stereotypes is, they sink unfiltered into the public domain, get picked up by people who couldn’t possibly know any better and end up in policy-making. In the worst case eventually everyone will wonder, why these policies and thereby everything else fails.
No-one in the rare earth industry anywhere can possibly have an interest in that.
Perhaps FT should take a lesson or two from Quartz:
China’s rare earth hub is rolling out massive subsidies to fix the industry’s Achilles heel The Baotou government’s new measures (pdf, link in Chinese) are designed to address some of those weaknesses. Plenty of tax incentives and subsidies are being introduced to entice investments in the rare earth industry…
The byproducts problem is one that’s being urgently discussed by executives and government officials. At a conference on rare earth supply chains this April, industry experts noted (link in Chinese) that the excess production of lanthanum and cerium poses serious barriers to the overall development of China’s rare earth industry.
This Quartz journalist seeks truth from fact by researching and - important - asking Chinese experts, rather than believing what being told, parroting common-place stereotypes and replicating non-vetted corporate fog.
The Rare Earth Sector Enters a Period of High Prosperity
sina.com carried an analysis, titled “The rare earth sector enters a period of high prosperity”:
Rare earth permanent magnet terminal demand is expected to maintain high prosperity for a long time
We are not surprised. Given the overcapacity build up in permanent magnets, the pull for rare earths magnet materials should be enormous. However, as we have seen during spring, RE prices can not defy gravity:
The graph in the article is not entirely correct, as the cost contain averages (=too high on the lower end magnets and and too low on the higher end magnets) and prices refer to list = spot prices, which often do not apply to long term volume-discounted contract prices. But what we can see from the graph, that it was clearly the raw materials pushing up the NdFeB prices and afterwards the consumers of NdFeB pushing back.
How does this work?
Balance of Terror
Leading NdFeB makers have price gliding clauses in the contracts, enabling them to pass increased raw material prices to magnet consumers. However, the contracts typically also have quantity adjustment clauses, enabling consumers to take reduced quantities. The balance of terror: Manufacturer increases the price, consumer reduces the quantity (and starts negotiating with an additional supplier, who is eager to place quantities).
Breakpoint: Break-Even
In order to reach/keep the break-even-point, a manufacturer of anything must keep the utilisation rate of his factories above a certain level. In metal commodities this is ca. 70%, from our experience. If reduced customer offtake quantities push the utilisation rate below such mark, operating losses kick-in and that is when price/margin compromises start, regardless of raw material cost.
The high volumes with low margins in permanent magnets are those types, which only operate at lower temperatures and in whose composition 20-30% of NdPr content is replaced by cheap cerium. This, however, does not apply to the NdFeB in above graph, which are used in automotive, e.g. electric power steering.
Taking a Dead-End Shortcut?
An avid reader pointed us to the fact, apart from other documentation, that Vital Metals will need to file a Environmental and Social Impact Assessment (ESIA) for North T and Tardiff Zones as per Canada law, if they go into commercial production. Currently, what Vital Metals do, may be described as an oversized pilot run, proof of concept. This course of action is similar to some other RE hopefuls, in case of Canada with active financial support of Canadian government entities, who undoubtedly will require compliance down the road. When contacted by e-mail about the status of ESIA for Nechalacho’s “T-Zone”, Vital Metals chose not to respond.
Stock Market
While in average still up 33% for the year, western rare earth stock prices are taking a beating these days, while China’s rare earth manufacturers’ shares are thriving, in average +85% for the year, with not a single stock cheaper than at the start of the year. May be also the result of successful decoupling from the most prospective market and from the most prospective investors in rare earths: China. However, it is up to China to induce inevitable changes, to lay the ground for renewed cooperation at least on an economic level. China can’t seriously expect good-faith trade negotiations, while continuously asking the People’s Liberation Army to prepare for imminent war.
The overarching conflict remains between one of the oldest surviving empires versus the oldest constitutionally-governed nation in the world.
Read on, more articles.
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