Rare Earths (MCP) (REE) (AVL) Overpriced, China Restrictions Will Create a Future of Excess - Telegraph
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Following the decision from the Chinese government to limit its exports of rare earth elements, prices of the minerals skyrocketed right along with the stocks of mining companies outside of China.
However, a report from the Telegraph on Monday stated that the extreme run up in rare earth prices may be overblown.
Cited by the Telegraph, Nigel Tunna, the managing director of the British-based Metal Pages, said that the policies will stimulate global production or push manufacturers to look for alternatives if they do not wish to rely on China.
Tunna said, "China is doing two things with its policy. It is protecting against foreign ownership of strategic resources and at the same time creating incentives for foreign companies to bring their manufacturing to China. The West has grown used to cheap raw materials, but is going to have to get used to the fact that prices are going up as countries scramble to secure finite resources."
One industry analyst said that the despite the recent price surges, the rare earth industry will be worth only $3 billion by 2014, which is barely 1 percent of the world's iron ore market.
Analysts are predicting the two biggest miners of rare earth on the planet, Molycorp (NYSE: MCP) and Lynas, to deliver an additional 60,000 tons of the minerals by 2015.
Ian Chalmers, the managing director at Alkane Resources, said "I've been in this business for 20 years and never seen anything like it. The reality is that China dominates the rare earths industry and it has a very clear policy of seeking to take those rare earth metals into value-added products and that is a concern in many people's minds. But if you look at production coming on-stream in the next 10 years, the situation is not as dire as people make out."
The biggest rare earth companies listed on the U.S. stock market have been extraordinary performers in the last year.
In midday market movement on Monday:
Avalon Rare Metals (AMEX: AVL) up 1.71 percent to $6.55
Rare Earth Elements (AMEX: REE) up a penny to $10.41
Molycorp down 35 cents to $43.63
However, a report from the Telegraph on Monday stated that the extreme run up in rare earth prices may be overblown.
Cited by the Telegraph, Nigel Tunna, the managing director of the British-based Metal Pages, said that the policies will stimulate global production or push manufacturers to look for alternatives if they do not wish to rely on China.
Tunna said, "China is doing two things with its policy. It is protecting against foreign ownership of strategic resources and at the same time creating incentives for foreign companies to bring their manufacturing to China. The West has grown used to cheap raw materials, but is going to have to get used to the fact that prices are going up as countries scramble to secure finite resources."
One industry analyst said that the despite the recent price surges, the rare earth industry will be worth only $3 billion by 2014, which is barely 1 percent of the world's iron ore market.
Analysts are predicting the two biggest miners of rare earth on the planet, Molycorp (NYSE: MCP) and Lynas, to deliver an additional 60,000 tons of the minerals by 2015.
Ian Chalmers, the managing director at Alkane Resources, said "I've been in this business for 20 years and never seen anything like it. The reality is that China dominates the rare earths industry and it has a very clear policy of seeking to take those rare earth metals into value-added products and that is a concern in many people's minds. But if you look at production coming on-stream in the next 10 years, the situation is not as dire as people make out."
The biggest rare earth companies listed on the U.S. stock market have been extraordinary performers in the last year.
In midday market movement on Monday:
Avalon Rare Metals (AMEX: AVL) up 1.71 percent to $6.55
Rare Earth Elements (AMEX: REE) up a penny to $10.41
Molycorp down 35 cents to $43.63
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