Rare Earths are So Hot, They're Now Affecting Hard Drive Pricing (MCP) (REE) (AVL)
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Selling prices on hard drives are expected to increase in response to the increasing costs of one key material.
According to Digitimes, China's export control on rare earth minerals will boost average selling prices (ASPs) on hard drives by five to ten percent. The report has prices for 500 gigabyte drives increasing ten percent in the third-quarter, while 1 terabyte drives are expected to increase in price by only five percent.
Sources have also said shipments in the second-half of 2011 may stay flat for the first time ever. Two catalysts for the estimate are the earthquake in Japan last March as well as declining demand in mature markets.
Rare earth prices have soared since China reduced exports to 30,000 tons in late 2010, a 40 percent reduction. Companies like Rare Earth Elements (NYSE: REE), Molycorp (NYSE: MCP), and Avalon Rare Metals Inc. (NYSE: AVL) have seen share prices rocket higher. Though rare earths are used in limited quantity for hard drives, the 20- to 30-fold increase in prices is now enough to warrant attention.
Companies that might see a slight crimp on margins include Western Digital (NYSE: WDC), Seagate Technology (NYSE: STX), and Toshiba, among other smaller players.
According to Digitimes, China's export control on rare earth minerals will boost average selling prices (ASPs) on hard drives by five to ten percent. The report has prices for 500 gigabyte drives increasing ten percent in the third-quarter, while 1 terabyte drives are expected to increase in price by only five percent.
Sources have also said shipments in the second-half of 2011 may stay flat for the first time ever. Two catalysts for the estimate are the earthquake in Japan last March as well as declining demand in mature markets.
Rare earth prices have soared since China reduced exports to 30,000 tons in late 2010, a 40 percent reduction. Companies like Rare Earth Elements (NYSE: REE), Molycorp (NYSE: MCP), and Avalon Rare Metals Inc. (NYSE: AVL) have seen share prices rocket higher. Though rare earths are used in limited quantity for hard drives, the 20- to 30-fold increase in prices is now enough to warrant attention.
Companies that might see a slight crimp on margins include Western Digital (NYSE: WDC), Seagate Technology (NYSE: STX), and Toshiba, among other smaller players.
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