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.
By Chris Berry (@cberry1)
For a pdf copy of this note, please click here.
China Repositions
With attention focused on Greece and the brinksmanship on display, it was refreshing last week to focus on another topic and participate in a roundtable discussion on the development path for China and its minor metals business over the next five years. The seminar, held in New York and hosted by TREM and MMTA (two important think tanks focused on the strategic metals space), hosted numerous individuals across metals value chains, from traders, to strategists, to trade lawyers to investment professionals. I participated as a panelist with a group emceed by Clint Cox, founder of The Anchor House, an exceptional think tank on rare earth element matters.
What We Found Out
The seminar was more “macro” in substance and was a refreshing change from the typical conference where you’re pitched by a litany of REE juniors all trying to prove their worth. The conference centered on the methods China’s leaders are employing to build sustainable domestic supply chains and evolve China’s manufacturing base.
By Chris Berry (@cberry1)
For a pdf copy of this note, please click here.
After watching the 60 Minutes report on Molycorp (NYSE: MCP) recently, I posted the following tweet:
By Chris Berry (@cberry1)
For a PDF version of this note, click here.
I have recently returned from Hong Kong where I was privileged to deliver a keynote address at the 121 Mining Investment Forum. In an environment which is crying out for a new conference model, the founders at 121 are on to something. There is an institutional appetite in Asia for mining deals despite the cyclical and structural disinflationary headwinds that appear to be intensifying.
My motive in attending the conference, aside from networking, was to get a feel for how Asia-based investors viewed the metals markets and what sort of questions they were asking.
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.
