Categories: General Market Commentary
Topics: General Market Commentary

Rare earths deja vu: Chinese crackdown = higher prices

In a scene awfully familiar to those who follow the rare earths market, China is once again threatening to hatchet production of the valuable minerals used in high-tech, renewable energy and military applications.

Last week it was reported that the Chinese government published new guidelines designed to eliminate illegal mining and encourage more high-end processing. Those sterile words are code for “less polluting”.

Shutting down illegal rare earth mines is nothing new to the Chinese, who have found that the process of extracting rare earth oxides from ore and refining them into useable products has come at a high price to the environment.

(For more about the poisoned lake and rare earth mining near Baotou, Inner Mongolia, read this story by the BBC.)

"Dependency on one country or source for rare earths is dangerous. Right now the situation is fairly dire in the industry because we are being held captive by the Chinese for these materials."— BravoSolution's Paul Martyn

What is news, is the effect that limiting Chinese production will have on rare earth oxide prices; we only need take a look back to know this to be true.

China controls about 90% of the rare earth market so any export restrictions will be felt in countries that buy them, including the United States and Canada. The only REE mine in the United States, Molycorp’s Mountain Pass, went bankrupt in 2015 – although it is making a comeback, having been purchased by a US-led consortium.

In 2009 China launched a crackdown on illegal REE mining. At the time authorities said the unregulated industry was driving down global prices, making it impossible to cover the huge environmental clean-up costs.

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