Seeking Alpha
What is your profession? ×
Newsletter provider, ETF investing, long only
Profile| Send Message|
( followers)

Rare earth metals plays have been on the run since last week’s discovery of potentially massive undersea deposits of these key industrial materials, but today’s news from China may provide support.

China, the primary source of most of the world’s available rare earth elements, disappointed consumers around the world overnight by leaving its export quotas effectively unchanged for the remainder of the year.

In theory China, has committed to sell up to 15,738 tons of these materials — used in a wide range of high-tech applications such as cell phones and renewable energy systems — in the second half of 2011, compared with just 7,976 tons a year ago.

However, the country says it is counting rare earth alloys against that quota, which means that in practice the world’s manufacturers will need to compete even more fiercely to make sure they get the specific elements they need.

The move comes in the face of a recent World Trade Organization warning that China’s reluctance to share its rare earth supplies breaks global trade rules.

The European Union has already called the new quotas “highly disappointing.”

Still, the news that China remains stingy with its reserves should support other rare earth producers, which have been on the defensive since last Friday’s discovery of potentially vast amounts of these substances on the sea floor.

Despite their name, “rare earths” are actually not scarce in the earth’s crust, but known deposits have been dormant or undeveloped for years because China has been willing and able to meet global demand.

But as demand soars, new miners are emerging to fill the gap.

The biggest, Lynas (OTCQX:LYSCF), lost ground overnight in Australian trading on early reports that China had actually doubled its export quota instead of keeping it steady.

The stock could get a relief bounce in New York today:

Other rare earth names to watch include Molycorp (NYSE:MCO), Rare Element Resources (NYSEMKT:REE) and Avalon Rare Metals (NYSEMKT:AVL), not to mention specialized ETF (NYSEARCA:REMX):