INDUSTRY BULLETIN: Rare Earth Prices Continue Dramatic Rise both Outside and Inside China

In our ongoing efforts to provide you with broader communications and industry information, we are pleased to issue this Industry Bulletin, which reports on the dramatic appreciation in prices for the heavy rare earth elements over the last few weeks, both outside and inside China.

Based on information reported by Metal-Pages^TM prices for individual rare earth oxide have risen 58% outside of China, and 96% inside China in the last six weeks, as illustrated in the tables below.[1] The largest percentage price increases have been for europium, terbium and dysprosium; three of the heavy rare earths. Europium and terbium are used in the energy-efficient lighting sector in Light Emitting Diodes (LED) with europium widely used as a red phosphor and terbium used as a green phosphor. Dysprosium is widely used as an additive to high strength neodymium iron boron magnets to improve their performance, particularly in high temperature operating environments. These magnets can be found in the traction motors in hybrid vehicles and direct drive generators in wind turbines.

Prices for rare earth elements increased steadily in 2010 outside China (FOB China) as discussed by Avalon in its Information Bulletin of August 23, 2010, due mostly to decreases in Chinese export quotas.  However, in 2011 (especially over the last six weeks), REE prices have increased significantly inside China as well, reflecting decreased supply in the face of growing demand. This appears to be a consequence of the measures being implemented by the Chinese government to consolidate the rare earth industry, to make it more efficient and reduce environmental impacts.  These measures include: cracking down on illegal mining, consolidation of producers in both the North and South, production quotas, and the imposition of tough emission limits on producers, forcing some to cease operations.

The evolution of the rare earth industry in China has been attracting a lot of mainstream media interest including National Geographic magazine which published a story in the current (June, 2011) issue on China's efforts to implement more clean energy production in a feature entitled "Can China Go Green?". The article highlights China's push to end its reliance on fossil fuels, especially coal.  Immediately following this article is a feature on Rare Earths entitled "Rare Earth Elements. The Secret Ingredients of Everything" which highlights the importance of Rare Earths in new technology, especially clean technology as well as China's dominance in the production of rare earths.

There is general consensus that demand for rare earths will continue to grow, and their use will expand, even in the face of these higher prices. There is also general acceptance now of the reality that historical prices did not reflect the true cost of extraction and higher prices are needed to make the industry more sustainable in the long term. Supplies will remain tight (especially for the heavy rare earths) until new projects such as Nechalacho come on stream over the next two to five years.

Table 1:

Source for prices: Metal Pages 

If you have any comments or questions on this article or the rare earths generally, please do not hesitate to contact Avalon directly at ir@avalonraremetals.com.To find out more about Avalon Rare Metals Inc., please visit our website at www.avalonraremetals.com.