Rare earths pricing and demand will remain volatile until there is a steadier source of supply from outside China, according to Gareth Hatch, founding principal of consultancy Technology Metals Research LLC, Carpentersville, Ill. Currently, more than 95 percent of rare earths are produced in China.
While demand for rare earths has grown by a nearly double-digit compounded annual rategiven its use in a variety of high-technology and energy products, including those used by the defense industryand rare earths role in the miniaturization trend for electronics and other devices, supply has been diminishing since 2009 with Chinas introduction of export quotas and tariffs, according to Daniel J. Cordier, rare earths mineral commodity specialist at the U.S. Geological Survey. That resulted in the price of rare earths going crazy, peaking in the summer of last year, he said, noting that while prices have come down somewhat since then they remain about double 2010 levels.
Some rare earths moved up more dramatically than others. For example, Hatch noted that prices for cerium oxide and lanthanum oxide increased an astounding 1,500 percent, peaking at $130 to $150 per kilogram last July from $4 to $5 per kg earlier.
Similar price increases were seen with other rare earths, with the tightest supply being for such heavy rare earths as dysprosium, terbium and yttrium, given the Chinese two-tier export quotas, which the Chinese government imposed to keep the strategic raw materials within the country.
With the price increases, demand has been sloppy for the past year or so, Christopher Ecclestone, principal and mining strategist at New York-based Hallgarten & Co. LLC said, with some manufacturers holding off purchases and considering substitution to alternative materials where possible.
This continues even though some relief could come from new light rare earths mining capacitysuch as that being brought online later this year by Greenwood Village, Colo.-based Molycorp Inc. and Australias Lynas Corp.and Chinas recent loosening of some rare earths export quotas. However, it is uncertain if Chinas recent move, prompted largely by political pressure, will be permanent or if the country is just testing the waters to see if it can spur demand for rare earths, Ecclestone said.
It is possible that, given the new capacity, the Chinese quotas for light rare earths could fade away while the country keeps facilities processing the less-abundant heavy rare earths, Hatch said.
That uncertainty, plus the fact that the lions share of rare earths conversion likely will continue to be done exclusively in China and little outside processing capacity is likely to come on-stream any earlier than 12 to 18 months, likely will keep rare earths supply tight and users looking for alternatives.