RARE EARTH PRICE SPIKE

Chinese rare earth metals prices soar
Leslie Hook, may 26, 2011 (UK Financial Times)

"A gravity-defying leap in the price of Chinese rare earth metals has triggered fears that the cost of components used in a range of goods from mobile phones to hybrid cars could soar…The three to fivefold jump in prices since January comes after China, the world’s biggest producer of rare earths, has clamped down on domestic output.

"The implications could be far-reaching. Although annual consumption of the metals is small relative to that of other commodities, rare earths are found in everything from fluorescent lights to wind turbines. They are very difficult, if not impossible, to substitute."

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"Industrial buyers are in shock after witnessing the price of rare earths such as cerium oxide jumping 475 per cent in just five months, amid falling supplies…

"Rare earths came under the spotlight after China, which produces more than 90 per cent of the world’s total output, started to reduce export quotas two years ago. Beijing’s influence aroused concern when exports of rare earths to Japan were temporarily suspended after a diplomatic dispute."

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"Following that de facto embargo, governments around the world, particularly Washington and Tokyo, have stepped up their efforts to develop other sources of supply. But those efforts will take years. In the meantime, Beijing has tightened regulations on its own polluting rare earths sector as part of a programme to clean up Chinese mines. Many expect China’s rare earth production to fall as a result…

"In the face of concern from industry and from global capitals, China has insisted that it will continue to be a reliable supplier of rare earths. However, rising prices fit neatly with China’s ambition to end its role as supplier of cheap rare earths to the world…"