Great future for rare earth metals: Jim Rogers
LONDON (Commodity Online): Which is the ideal metal commodity that you should think about investing in? Gold, silver, copper etc are certainly hot among the precious and metals camp for investors. But global investing guru in commodities Jim Rogers feels that investing in rare earth metals is going to bring great rewards.
“The future of rare earth is great. What is happening is the prices are going through the roof because the Chinese do control the supply, but it is pure simple capitalistic economics now,” Rogers told India’s business television channel ET Now.
Rogers, who is chairman of who is chairman of Rogers Holdings and founder of the Rogers International Commodity Index, has been a proponent of astute investment strategies in commodities.
Known for his investment fascination for China, Rogers said that rare earth makes great investing sense because the bulk of the metal is produced by China.
“Well, China does produce 97% of rare earth. Uranium is not a rare earth, but they do produce a lot of uranium as well,” he said.
Rogers said that a lot of other people apart from China are opening mines because they can make a lot of money and governments are behind the companies opening new mines.
“So it’s all going to bring a new supply and eventually the price of rare earth will come down again. But in the mean time until the new mines can come on stream, somebody is going to make a lot of money,” the legendary commodities investor who is known for his famous books like Hot Commodities and A Bull in China said.
Recently, global buyers of rare earth minerals were concerned over the export cut announced by China, which produces 97 percent of the world's supply.
A report by the U.S. Department of Energy warned that unless the United States diversifies its sources for rare earth minerals, manufacturers of clean energy products are at risk of major supply disruptions.
"We are very concerned about China's export restraints on rare earth minerals," a spokeswoman for the office, Nefeterius Akeli McPherson, told the Times. "We have raised our concerns with China and we are continuing to work closely on the issue with stakeholders."
China will cut its quota on rare earth exports by approximately 35 percent for 2011, the Ministry of Commerce recently.
This latest reduction comes after Beijing slashed its rare earth export quota 72 percent for the second half of 2010. China typically issues two rounds of quotas each year.
The Chinese Ministry of Finance also said on its Web site last week that China will raise the export taxes for some rare earth minerals to 25 percent in 2011.
Supplies of legal and smuggled rare earth minerals from China used in production of electronics are tightening, a London expert in rare earths said.
China's continued curbs on rare earths are likely to fuel more anxiety among global buyers regarding China's strong hold on the 17 elements. While China has about 30 percent of global rare earths reserves, it produces 97 percent of the world's supply.
"We do believe that this source of supply is diminishing, and there is some evidence leakage over the border into Vietnam is diminishing," Judith Chegwidden, managing director at Roskill Consulting Group, said, referring to the route smugglers take from southern China.
Analysts estimate half the worlds legally sold rare earth minerals, such as dysprosium, terbium and europium, come from China, primarily southern China. About half comes from the same source, but is mined illegally and smuggled out of the country.
China controls about 99 percent of the world's supply and said this week export quotas for the first half of 2011 would be lowered 35 percent, The New York Times reported Wednesday. There is evidence the country is also cracking down on illegal mining operations. A source in China said 100 mine owners and managers had been arrested recently.
Rare earths are crucial for green energy and high-tech components such as wind turbines, low-energy light bulbs, batteries for hybrid and electric cars, lasers, fiber-optic cables, cellphones and flat-screen monitors. The elements are also used for military applications, such as missiles.
However, China defended the cuts, citing environmental concerns.
"China's measures are for the sake of protecting the environment for the sustainable development for the industry," said Zhang Anwen, deputy secretary-general of the Chinese Society of Rare Earths, China Daily reported.