Disruptive Discoveries Journal

Molycorp

Infrastructure for the 21st Century: Building a Non-Chinese Rare Earth Supply Chain

Chris BerryComment

By Chris Berry (@cberry1)

For a PDF copy of this note, please click here.  

 

 

  • After a tumultuous few years unleashed by geopolitical rivalries in Asia, the rare earth sector has mean reverted with rare earth element (REE) prices having fallen by as much as 90% from their peak in 2011.
  • It is interesting to note that the core issue which drove exponential gains in rare earth prices – supply chain dependence on China – is still a reality.
  • In the wake of Molycorp’s (MCPIQ:OTCBB) spectacular implosion and bankruptcy and the financial struggles of Lynas (LYC:ASX), many are questioning whether or not a REE supply chain outside of China is even feasible.
  • While the collapse in REE prices has rendered most non-Chinese deposits uneconomic, a weaker local currency coupled with government support may be enough to begin to establish a reliable source of saleable REE products outside of an increasingly unstable China.
  • Additionally, reports have emerged that many REE producers inside China are operating at a loss.
  • Thanks to these market inefficiencies, this industry is set to consolidate. Expect to see M&A and co-opetition as the industry adjusts to a new normal of lower prices despite healthy demand.
  • This white paper looks at the current state of the REE sector and aims to present a vision of what a REE supply chain might look like in this new macroeconomic environment.

The Quiet Resilience of Energy Metals

Chris BerryComment

By Chris Berry

 

Despite their small size (in terms of yearly production) relative to base metals or fertilizers, many of the Energy Metals which I follow continue to make their strategic significance felt. We have talked a great deal in recent months about global excesses in labor and capital putting a “lid” on commodity demand. A confluence of geopolitical and economic issues has come to the fore which has only, I think, strengthened this thesis but has also paradoxically helped Energy Metals reassert their significance in global supply chains.

 

When it Happens…It’ll Happen Fast

The phrase above was said to me once by a money manager commenting on one of the main questions we have been asking ourselves in recent months. Namely, “When will this cycle turn?” With respect to Energy Metals, we could very well be at that tipping point.