Jon Hykawy reports that in the past year well-respected voices have been saying that the problem with the industry is illegal production in China. Dr. Dudley Kingsnorth, for one, at the Argus Americas Rare Earth Summit in Las Vegas, outlined the problem as he sees it. Basically, total legal production of rare earths in China in 2013 allowed for 105,000 tonnes. Fairly accurate estimates based on where that production occurred meant that about 20,995 tonnes of that was in the form of neodymium and praseodymium in 2013. But if you total the amount of magnets made in China in 2013, the industry actually needed about 30,348 tonnes of neodymium and praseodymium in 2013 alone. Obviously, that means that 9,353 tonnes of neodymium and praseodymium were supplied outside of the legal production quota. Hence, illegal mining.
If you extend that argument, the hypothesis is that in 2015, legal mining in China will make about 105,000 tonnes of total rare earth oxides (REO), while illegal mining in China will make another 40,000 to 45,000 tonnes .... there will then be a global surplus of about 50,000 tonnes of REO, which explains the low prices that we are seeing. There is too much material chasing a market that is simply too small. By this argument, once the Chinese authorities clamp down on illegal mining, the future is golden. We need to sit back, wait and hope because there is nothing that the rare earths industry outside of China can do to help. That this purported illegal mining has been going on for years and has not yet been shut down or even dented meaningfully might be a little concerning.
Of course, if the above is true, then the rare earths space is the only mining industry in the history of the world that, when faced with some of the lowest prices in its history, still has a cohort of illegal miners that are so efficient that they can produce at costs much lower than those of the largest and best miners in China.
Managed & Built by I2M Consulting, LLC | © 2010-
