Our Rare Earths MMI held steady, or flat, depending on how you look at it, at 17 this month, an example of how stagnant prices have been in a low range this year.
The low price of rare earths did not come about because of export quotas being struck down in China or the World Trade Organization loss that precipitated the quotas’ end. In China, heavy rare earths production became more stable, but that wasn’t the reason either. What has caused the rare earths market to essentially collapse is substitution on a large scale and better recycling of the high-tech minerals.
Rare earths demand has fallen because manufacturers sought to eliminate the threat of a national blockade, the likes of which Japan felt after Chinese rare earths producers essentially blacklisted the country in 2011.
Companies such as Siemens (NS:SIEM), Samsung (KS:005930) and Honda (NYSE:HMC) have accelerated research on how to use less of the minerals, especially the “heavy” rare earths such as lanthanum and dysprosium. In that way, China hurt its own monopoly by forcing their customers to apply more ingenuity and brains to eliminating or limiting the scarce elements in their supply chains. Honda even produced a hybrid car engine, the first ever, that doesn’t rely on heavy rare earths.
Honda’s apparent turning point was a partnership with fellow Japanese firm Daido Stee (T:5471) in 2011, prompted by China’s squeeze. The result today is a new technique for designing crucial engine magnets that avoid heavy rare earths and are 10% cheaper and 8% lighter, Honda told the Wall Street Journal.
The world will still likely need rare earth elements, particularly for renewable energy products such as solar panels and wind turbines, but the evidence of the damage done by China’s attempt to corner the market on heavy rare earths is now overwhelmingly apparent and a recovery in prices will not happen in the short term.
by Jeff Yoders