Rare earth metals special report by london metal group
London Metal Group specialising in Rare Earth Investments, Rare Earth Commodities and Rare Earth Metals, we aim to offer investors a professional service which can enable them to make wise and profitable choices in this particular investment arena. London Metal Group Citibank Tower Canada Square Canary Wharf London E14 5LBwww.rare-earth-investments.com email@example.com
2 “Rare Earth Dispute Heightens China-US Divide” Rare Earth Metals have come to dominate world economic and investment headlines in recent months. The underlying reason for this comes down to one of the most basic economic principles: supply and demand. The Chinese being the largest producer of these metals account for almost 95% of the metals supplied. They have for environmental and economic reasons decided to restrict the supply of these precious metals which are very much in demand. In this report, LMG (London Metal Group) takes a more in depth look at this exciting investment arena. In classical economic theory, the relation between demand and supply determines the price of a commodity. This relationship is thought to be the driving force in a free market. As demand for an item increases, prices rise. When manufacturers respond to the price increase by producing a larger supply of that item, this increases competition and drives the price down. The relationship between demand and supply underlie the forces behind the allocation of resources. In market economy theories, demand and supply theory will allocate resources in the most efficient way possible.
3 “Battle for Rare Earth Supply Continues" How is Demand and Supply affecting Rare Earth Metals? • When demand for a product increases but supply remains the same, this can lead to higher prices. • When supply of a product decreases but demand remains the same, this can also lead to higher prices. Rare earth metals are used in many everyday items that we take for granted, such as magnets, mobile phones, digital cameras, car batteries and laptop computers. Rare earth metals are used in many other electronic applications as well as lasers, optics, missiles, and surveillance equipment. The demand for rare earth metals is steadily increasing. The supply of rare earth metals, as we shall see, however, is not increasing along with demand, and could even decrease. The opportunity for investment in rare earth metals arises from the fact that there is an ever-increasing demand of materials that are in relatively short supply, which leads inevitably to rising prices. What are Rare Earth Metals? Rare earth metals are a set of seventeen chemical elements in the periodic table, specifically the fifteen lanthanides plus scandium and yttrium. Despite their name, rare earth elements are relatively plentiful in the Earth’s crust. However, because of their geochemical properties, rare earth elements are typically dispersed and not often found in concentrated and economically exploitable forms. The few economically exploitable deposits are known as rare earth. It was the very scarcity of these minerals that led to the term “rare earth”.
4 Where do Rare Earth Elements come from? Rare earth elements became known to the world in 1787 with the discovery of the black mineral "ytterbite", extracted from a mine in the village of Ytterby in Sweden; many of the rare earth elements bear names derived from this location. Until 1948, most of the worlds rare earths were sourced from sand deposits in India and Brazil. Through the 1950s, South Africa took the status as the worlds rare earth source, after large veins of rare earth bearing monazite were discovered there. From the 1960s until the 1980s, the Mountain Pass rare earth mine in California was the leading producer. Today, the Indian and South African deposits still produce some rare earth concentrates, but they are dwarfed by the scale of Chinese production. China now produces over 95% of the worlds rare earth supply, mostly in Inner Mongolia, and all of the worlds heavy rare earths (such as dysprosium) come from Chinese rare earth sources. New demand has recently strained supply, and there is growing concern that the world may soon face a shortage of the rare earths. What are common uses for Rare Earth Metals? Rare Earth Metals have many uses. Today they are mainly found in all our electronic devices that we have come to depend on in our modern day lifestyle such as mobile phones and computers. Large quantities are also consumed as catalysts and in the production of glasses and sunglass lenses and they are widely used in magnets and phosphors. As technology moves on new uses are being discovered for various rare earth metals.
5 Rare Earth Metals can be used in superconductors, electronic polishers, refining catalysts and hybrid car components (primarily batteries and magnets). They can have optoelectronics applications, such as in lasers and optical- fibre communication systems. Phosphors with rare earth elements are also widely used in cathode ray tube technology such as television sets, night vision goggles, rangefinders, radar used in some warships and fibre-optic transmission links that carry internet traffic. Lots of “green” technologies depend on them, including wind turbines and low-energy light bulbs. Demand already outstrips supply and China’s near monopoly limits the supply. Growing demand from developing countries has led to additional strain on supply, and there is increasing concern that the world may soon face a shortage of rare earth metals, as borne out by the recent headlines. In several years worldwide demand for rare earth elements is expected to exceed supply unless major new sources are developed. China controls an estimated 95-99% of the known world’s supply. Concerns about supply constraints have intensified due to the actions of China, the predominant supplier. China sent shock waves through the market in 2010 when it imposed export quotas on all rare earth elements. In 2011, it imposed an export quota of 30,184 metric tonnes, marginally reduced from 30,258 metric tonnes in 2010. Based on analyst calculations, the country’s full-year quota for 2012 may hit approximately 31,130 metric tonnes. China recently stated that the curbing of exports was motivated by environmental concerns and not trade protectionism, and do not target any specific country. The EU, however, has stated that foreign companies pay up to twice as much as Chinese firms for rare earth metals, claiming that the restrictions benefit the Chinese industry alone and are therefore against WTO regulations.
6 Are there any alternative sources for Rare Earth metals? Due to the increased demand and tightening restrictions on exports of the metals from China, some countries are stockpiling rare earth resources. Searches for alternative sources in the United States, Australia, Brazil, Canada, South Africa and Greenland are ongoing. The Mount Weld project in Western Australia, for example, plans to double production as it moves into the second phase of mining. Mount Weld is touted to have the world’s richest rare earth deposit, and is expected to produce some 1.1 million tonnes of rare earth oxides. That’s enough to supply up to 20 per cent of the global market for 30 years, according to some analysts, but for the time being China will remain the dominant source. How can I invest in Rare Earth Metals? Rare earth elements are not exchange-traded in the same way that precious (for instance, gold and silver) or non-ferrous metals (such as nickel, tin, copper, and aluminium) are. Instead they are sold on the private market, which makes their prices difficult to monitor and track. However, prices are published periodically on the internet. The 17 elements are not usually sold in their pure form, but instead are distributed in mixtures of varying purity. As such, pricing can vary based on the quantity and quality required by the end user’s application. The fact that markets are not transparent only increases their attractiveness as an investment vehicle. The savvy investor is able to exploit price movements to maximize returns. Some investors may choose to buy stocks of mining companies involved in rare earth metals. There are many variables at play when investing in this way, such as company overheads and expenses, cash flow and environmental issues. Investors need to study the fundamentals of these companies before making decisions on whether or not to invest. An alternative strategy is to buy the actual physical Rare Earth Metals. In this way, investors can protect their assets from currency devaluation and or inflation. Like gold rare earth metals are an insurance against the economic downturn. Understanding the Rare Earth market so you can make informed investment decisions is vital and key to success.
7 “China Still Ahead in Rare Earth Economic War” Why now? What’s all this about China? Long term investment prospects for Rare Earth Metals look very promising. Rare Earth Metals have had quite a lot of press recently. Many factors have caused this, chief of which is China’s export policies. Chinese officials, in an attempt to discourage illegal trading of rare earths, as well as an effort to reduce the environmental impact of Rare Earth mining, slashed export quotas over 70 percent. The media picked up this story, and as a result governments and international electronics companies were scrambling for answers. The world started catching on to the importance of Rare Earths, and the power that the Chinese monopoly holds over the market with over 95 percent of world supply. There are no signs on the horizon that these export quotas will be dropped, and as a result prices of these elements should continue to rise. Analysts maintain that Rare Earth Metal demand, which has been growing at about 10 per cent a year, is set to soar given the global need and growing use of green technology which use lots of these different metals in various applications. The growing numbers of people in the developing world who will also provide a market for electronic goods will only push demand higher.
8 Growing Demand for Hybrid Vehicles and Green Technologies Not just hybrid vehicles, they are increasingly being used in gasoline vehicles-emission controls, LCD and PDP displays, and are used to make high-strength magnets. Several Rare Earth Metals are essential constituents of both petroleum fluid cracking catalysts and automotive pollution-control catalytic converters. They have applications in many electronic devices. Even your favourite digital camera has Rare Earth Elements. Some even point to its effective use in military defence systems and insist that it is bound to be a $1-billion industry in the United States in the near term. There has been a dramatic shift in the last three years from oversupply to supply shortages. And some experts fear that China is set to engineer a supply crunch to suit its own domestic industries. This is an idea that is gaining ground and is sending a wave of panic across the globe. Panic breeds opportunity. As China diverts reserves to build domestic solar panels and modernise its army, the price of these non-exchange-traded metals are only bound to escalate. For example, China has only allocated 38,000 tons of rare earths for export this year, yet demand from Japan alone is expected to be 40,000 tons this year. An article in the Independent quotes Rare Earth metals expert Jack Lifton as saying, “A real crunch is coming. In America, Britain and elsewhere we have not yet woken up to the fact that there is an urgent need to secure the supply of rare earths from sources outside China.”
9 “Rare Earth Market Defies Bleak Forecasts” Why invest in Rare Earth Metals? Given that environmental applications of Rare Earth Metals have only increased markedly over the past three decades, analysts maintain this trend will undoubtedly continue, given growing concerns about global warming and energy efficiency. For the immediate future, there appears to be some investment plays for rare earth metals. And if one believes that the future holds large numbers of hybrid cars and those catalytic converters will continue to be used to clean the exhaust of the world’s internal combustion engines, then with Rare Earths is clearly where the action lies. Investing in rare earth metals with London Metal Group LMG specialises in Rare Earth Investments, Rare Earth Commodities and Rare Earth Metals, we aim to offer investors a professional service which can enable them to make wise and profitable choices in this particular investment arena. For a free investment guide go to free rare metal investment guide Find out what we can do for you by visiting our website
10 www.rare-earth-investments.com2 LONDON METAL GROUP Rare Earth Metals Report Rare Earth Investments 5/24/2012 London Metal Group specialising in Rare Earth Investments, Rare Earth Commodities and Rare Earth Metals, we aim to offer investors a professional service which can enable them to make wise and profitable choices in this particular investment arena.