Rare-earth demand will return with lower prices, Molycorp says

2011-10-25

    TORONTO (miningweekly.com) – Molycorp, the biggest non-Chinese rare earths producer, said on Thursday it would bring production forward by three months at the Mountain Pass mine it is refurbishing in California, hiking the capital cost by $114-million.

    In a presentation broadcast over the Internet, CEO Mark Smith said that despite a recent softening in rare-earth prices, the market would remain in a “substantial” deficit as China, which accounts for over 90% of global supplies, cuts production.

    He said that the government had been following through with its intentions to close rare earths mines in the Asian country, and that its biggest producer, Batou this week said it would halt output of the elements, used in wind turbines and computer storage, to support prices, which have slid over the past three months

    Molycorp business development VP Doug Jackson later added that the price difference between rare-earth exports from China and those inside the country would align.

“We’re already starting to see that,” he said.

    Prices for rare earths inside China are significantly cheaper than those sold to outside buyers, because the government has implemented hefty export taxes, as well as cutt the amount producers are allowed to send out of the country.

    Jackson predicted that prices inside China would rise more than what export prices would drop.

    He said that while the high pricing levels the Chinese export taxes and quotas caused might lead to some demand destruction until producers such as Molycorp began to deliver significant supplies from next year, buyers would return at lower prices.

“That demand comes back,” commented Jackson.

    Rare-earth prices rocketed over the past three years as Chinese exports shrank and demand from industries such as wind-power generation and hybrid vehicle manufacturing increased.

They began to soften this summer as worries about economic growth amplified fears that the lofty prices would cause users to seek alternatives.

    Jackson said that the fact that Molycorp was ahead of schedule in bringing its Mountain Pass facility, located in California, into production would assure rare-earth users outside of China that supplies were on the way.

    The New York-quoted firm now aims to lift 2012 production by some 3 500 t, to between 8 000 t and 10 000 t.

Molycorp said it will also start mining ore at the Mountain Pass mine next week, which it will stockpile while the plant is being completed.

“Every month that we accelerate our start-up provides that much more product to customers who need it now. This acceleration also expands the diversity of global supply, which is an increasingly urgent matter for rare-earth consumers,” Smith said in an earlier statement.

 

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