With technology ever expanding the use of Earth’s resources are expanding. We are no longer strictly focused on the lead, carbon, iron, zinc, gold, and coppers. Science is exploring a whole other realm of the periodic table. These rare earth metals (REM) or rare earth elements (REE), known as lanthanides are found on the bottom of the periodic table and ironically not terribly rare in the Earth’s crust. Although their names seem more like Greek Gods (i.e Hephaestus) or medications (i.e Coumadin); Cerium, Neodymium, Dysprosium and the like are becoming strategic metals.
These metals are used for electronics and high powered batteries. They are in laptops and cell phones and hybrid cars. They are in wind turbines, nuclear reactor cores and solar panels. Defense, water treatment, catalysts, ceramics and glasses all use REEs. Green energy is constrained by these metals.
REEs are often divided into light and heavy, with the light often regarded as less valuable. The list below superficially illustrates some of the uses for some of these metals:
Dysprosium - magnets (90% lighter), lasers
Terbium - makes electric lights 80% more efficient
Neodymium – high temperature magnets
Lanthanum - hydrogen storage
Praseodymium - lasers and ceramic materials
Gadolinium - rare-earth magnets, high refractive index glass or garnets, computer memory
Erbium - manufacture of vanadium steel
Ytterbium - infrared lasers
Terbium - makes electric lights 80% more efficient
Neodymium – high temperature magnets
Lanthanum - hydrogen storage
Praseodymium - lasers and ceramic materials
Gadolinium - rare-earth magnets, high refractive index glass or garnets, computer memory
Erbium - manufacture of vanadium steel
Ytterbium - infrared lasers
Realistically, China is the driving factor for these REEs as almost 95% of the physical metals are produced there. Over the last decade, world wide demand for these once under-known materials has expanded from about 40,000 tonnes to 120,000 tonnes. China’s internal consumption is presently at about 60% of production and rising rapidly.
About a month ago news from China came out that they will be curtailing exports. These announced export quotas, coincide with increased export tariffs and an introduced mining quota policy that will create production quotas and simultaneously limit the issuance of new licenses for rare earth exploration. Already, countries like Japan and South Korea have begun stockpiling such metals.
With this ever growing demand, there are few companies outside of China which are in the exploration and development. While this article is a means to educate the casual investor of the REEs the inevitable question is how one may purchase them. These metals are purchased on a contract basis so purchasing them directly for personal investment means is basically impossible.
There is no ETF yet, but one can purchase mining company equities. While there are no public commercial producers of REEs outside of China, The last major US rare earth metal producer, Molycorp (NYSE:MCP), closed its doors in 2002 due to low prices from China. However, last month they re-IPOed and now are the closest non-Chinese company to production.
California, Alaska, Canada and Russia have REEs, but again, production is far off. One must note when analyzing mining companies that once the ore is mined, the process of separating the different metals becomes a whole new science experiment. These processes are very energy intensive. Low power costs along with safe jurisdictions are key to any company stating they will be producing in the near future. Much as the aforementioned countries may already be stockpiling these metals, the US is facing a deficit in national supply. Complicating the matter is the potential for nations to declare the metals “strategic” (i.e. Chile has done with Lithium) further complicating the export process.
Comments
nostri
August 31, 2010
look at lynas corp in australia LYC
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Marx
August 31, 2010
You're off on a number of issues.
1) There is an ETF -> TSX.V:DAC or OTCQX:DCHAF (Dacha Capital).
2) There have been export quotas in place from the Chinese Ministry of Commerce much further back than this year. Current export quotas were cut about 72% YoY, but are actually supposed to bring in actual supply with actual demand. Previous years there was a surplus of material.
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damus
September 01, 2010
DAC is not an ETF, rather a company (25M) that purchases and sells rare metals. Although close, it is nothing more than an import export company. And its products still come primarily from China.
There has been a surplus for yeas as most of these metals were almost deleterious and some even byproducts of thorium.
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