Prices of Rare Earth Metals Declining Sharply

The NYT reports that the boom in rare earth prices seems to be over now - Prices of Rare Earth Metals Declining Sharply.

After nearly three years of soaring prices for rare earth metals, with the cost per ton of some of these elements rising nearly thirtyfold, the market is rapidly coming back down.

International prices for some light rare earths, like cerium and lanthanum, used in industries like the polishing of flat-screen televisions and oil refining, respectively, have fallen by two-thirds since August and are still dropping. Prices have declined almost as quickly for highly magnetic rare earths, like neodymium, needed for products like smartphones, computers and large wind turbines.

Big companies in the United States, Europe and Japan have been moving operations to China, drawing down inventories, switching to alternative materials or even curtailing production to avoid paying extremely high prices that prevailed outside China over the summer, executives said at an annual conference in Hong Kong on Wednesday.

As demand for rare earths has wilted outside China, speculators have been dumping inventories, feeding the downward plunge. Cerium peaked at $170 per kilogram, or $77 a pound, in August but now sells for $45 to $60 per kilogram.

That is still far above its price of $6 a pound three years ago, before China, the world’s dominant producer, began sharply reducing exports by cutting its export quotas.

“We all learned a hard lesson in July and August, how high these prices can go before customers begin yelling,” said Mark Smith, the chief executive and president of Molycorp, the only U.S. producer of rare earths.

He added that rare earth mining outside China remained very profitable even with the decline in prices, which has brought the market back down to its level last spring.

The sharp decline in demand and prices outside China could yet create another shortage next year, said Constantine Karayannopoulos, the chief executive of Neo Material Technologies, a Canadian company that has its factories in China.

That is because Chinese exporters are very unlikely to use all of their export quotas this year, and the Chinese Commerce Ministry has historically penalized exporters that do not use all of their quotas by giving them smaller quotas the next year.

China mines 94 percent of the rare earth metals in the world. Through 2008, it supplied almost all of the rest of the global annual demand of 50,000 to 55,000 tons. But it cut export quotas to a little more than 30,000 tons last year and again this year, and imposed steep export taxes, producing a shortage outside China.