WTO case may matter little to rare earths market

London, June 2012

News that the US, EU and Japan are escalating their dispute at the World Trade Organisation with China over its rare earths policies may matter little as new sources of supply are developing rapidly. The WTO process could take up to two years to reach some form of conclusion and by then alternative supplies from US-based Molycorp and Australia's Lynas Corp are likely to be well established. This should ensure reliable and steady supplies of light rare earths such as cerium and lanthanum for manufacturers of specialist metal alloys, catalytic converters and polishing agents.

Also, there are a raft of other rare earths projects in places such North America, Australia, Madagascar, Brazil and Kazakhstan, which could be producing material within three to four years and crucially could start to bridge the gap for the scarcer heavier rare earths elements such as dysprosium, europium and terbium. These are crucial for a range of renewable technologies.

Another key factor is the scale of rare earths smuggling out of China, which may well exceed the country's official exports. This leakage of material, which typically comes via Hong Kong or Vietnam, appears to be putting a cap on rare earths prices at the moment with many elements selling more cheaply outside China than within. "It is notable that many of China's moves to tighten it's grip on its rare earths industry don't appear to have translated into greatly reduced availability of rare earths or much higher prices when compared with last year," said Justin Pugsley, a spokesman for UK-based specialist metals pricing and news service, Metal Pages.

However, China's rare earths policies are ensuring the development of alternative supplies of rare earths and will ultimately undermine its grip on the industry as leading manufacturers outside China do not want to rely on unreliable smuggled material or a dominant producer motivated by political considerations. Moves to pressure high-tech companies into locating plants in China to gain guaranteed access to rare earths, often in exchange for sensitive technologies, may eventually backfire. Future plants are likely to be located in more neutral countries once alternative sources of rare earths have been developed.

"It's often not appreciated that China is itself likely to become a net importer of rare earths within five years," said Pugsley. "Although today they supply over 90% of the world's needs, they only control around a third of its reserves."

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About Metal Pages: A UK-based provider of prices, news and analysis on rare earths, minor metals and ferro-alloys. Prices published by Metal Pages are used as industry benchmarks for contracts.

Metal-Pages will be hosting Rare Earths 2012, Guangzhou, China, 12-14 September 2012 where the most pressing issues in the rare earths industry will be discussed.