Rare earths are not as rare as you might think, but the market and rare earth elements prices are certainly complicated.
There are 17 rare earth minerals in all, and each can be classified under different groups, with prices available for multiple individual and mixed products. From heavy rare earths to light rare earths, magnet materials and beyond, it can all seem a bit overwhelming at first glance.
Case in point: Argus Rare Earths keeps track of no less than 58 rare earth elements prices and rare earth oxide prices every month. Read on for a short introduction to the rare earth elements market and prices.
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China’s control of pricing
First and foremost, it’s important to know that China is the main driver when it comes to rare earth elements prices and the market as a whole. The country is the world’s leading rare earths producer, putting out over 90 percent of the world’s supply.
China has such a monopoly on the sector that rare earth elements prices spiked in 2010 and 2011 when the country cut exports. That sparked a boom for rare earths companies and mining projects around the world, as they sought to create a reliable supply of rare earths outside of China. Many rare earths mining projects outside of China failed to thrive when rare earth elements prices fell again.
In 2014, the World Trade Organization ruled against Chinese export quotas for rare earths, and China removed its industry caps in January 2015. The country also eliminated its export tariffs for rare earths in May 2015, leading to a further fall in rare earth elements prices.
The ongoing trade war between the US and China has added a layer of complication to the rare earth metals sector. While it’s been suggested that the country’s hold on the market is weakening, rare earth minerals and metals were not included when the Trump administration placed tariffs on US$200 billion of Chinese goods, a move that points to America’s dependence on the Asian nation. However, the Biden administration is reportedly considering tariffs on the import of rare earth magnets from China.
For now, at least, China remains the heavyweight, so it’s important that investors interested in the space keep track of what the country is up to in terms of rare earths production.
Where to find prices?
Unlike prices for gold and silver, rare earth elements prices are hard to come by, as there is no widely used public exchange for rare earths. Firms such as Argus put out regular price assessments based on surveys of traders, consumers and other market participants. This information is available for a fee.
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Price forecasts and other information can also be found via analyst firms and pricing forums such as Adamas Intelligence, Stormcrow Capital, Technology Metals Research and Asian Metal.
Not all rare earths created equal
Rare earths are used in a range of different technologies, and demand is higher for some than it is for others. They can be divided into “heavy” and “light” categories based on their atomic weight, and heavy rare earths are often more sought after.
That said, light rare earths can be important too. For example, neodymium and praseodymium, which are used in rare earth magnets, fall into the light category. These and other elements used in rare earth permanent magnets, such as dysprosium, can be quite expensive. Neodymium and praseodymium have been in the spotlight due to more excitement from the electric vehicle space.
The concentration of different rare earths varies within each given deposit, but usually a deposit is dominated by either heavy or light rare earths, with some elements being much more abundant. Cerium, for example, is the most abundant rare earth, and is more plentiful in the Earth’s crust than copper.
Both cerium and lanthanum, used in things such as alloys in steelmaking and industrial catalysts, are oversupplied. As a result, they are priced quite a bit lower than most rare earth magnet materials.
Another group of rare earths to consider is those used in phosphors, or phosphorescent materials, which are the active component responsible for adding color in fluorescent light bulbs and other lighting applications. Yttrium is fairly inexpensive when compared to more rare and therefore more expensive metals such as europium and terbium.
Rare earth concentrates and pricing
Think rare earths are easy to separate? Think again. As mentioned, rare earths deposits contain various types of rare earths, not to mention a range of other impurities such as uranium and thorium, which can be troublesome to dispose of to say the least.
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The separation process can be difficult and lengthy, and so far separators outside of China have not managed to undercut producers within the country.
Mountain Pass, owned by MP Materials, is the only operational US-based rare earths mine and processing facility. It produces high-purity separated rare earth oxides, including lanthanum, cerium and neodymium-praseodymium oxide.
The most well-known producer of separated rare earths outside of China is Australia’s Lynas (ASX:LYC,OTC Pink:LYSCF), which owns and operates the Mount Weld mine in Western Australia and a separation facility in Malaysia. Lynas recently received US$30.4 million in funding from the Pentagon to build a light rare earths processing facility, and earned another contract to build a heavy rare earths separation facility; both are to be located Texas.
It’s important for investors to keep in mind that rare earths within a mixed concentrate won’t fetch as high a price as those that are already separated. When looking at technical reports from junior mining companies, be sure to check that companies have accounted for this discount when calculating their rare earths basket price, which is the price for all the rare earths bundled into a single number based on the distribution of different rare earths within the deposit.
Approach prices with skepticism
As a final note, investors would be wise to watch out for price assumptions in technical reports that might not be as realistic as they could be. In these reports it’s common to use an average of rare earth elements prices from recent years to extrapolate on where prices are headed.
However, some averages might include the anomalous rare earths price spike from 2010 and 2011, leading to price predictions that deviate from broader trends.
This is an updated version of an article originally published by the Investing News Network in 2015.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
Should you invest in the rare earth market?
Read our outlook report this 2020!
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