Rare Earths Price Forecast: Lynas, Molycorp Flail, China Grips

Includes: LYSCF, MCPIQ
by: MetalMiner

by Taras Berezowsky

MetalMiner's monthly rare earth metal and oxide price index, the Rare Earths MMI®, notched a monthly increase for only the third time this year, and the second time in the last three months – no thanks to the likes of Molycorp (MCP) and Lynas Corp. (OTCPK:LYSCF), but more due to Chinese restrictions.

Yttrium, europium oxide, terbium metal and neodymium all played a role in boosting the index for October's reading.

Supply-side issues continue to hamper the rare earth metals market. "As the Chinese producers restrict production, the market is being squeezed – both domestically in China, but also globally," said Stuart Burns, co-founder and contributing editor of MetalMiner.

What Those Lovable Non-Chinese Producers Are Up To

Molycorp, the largest rare earths mine operator outside of China, will fall short of its goal of achieving 19,050 metric tons per year. The company produced at an annual rate of 15,000 tons in the second quarter, according to Bloomberg, as Stuart reported recently.

Lynas Corp. has also fallen well short of production goals. The Australian rare earths company sold just 117 tons of refined product through its recently started Malaysian processing plant in the June quarter, against its target of 11,000 tons for the year. (Lynas recently ran up against more trouble: clogging and premature wear-n-tear of equipment. Ruh-roh.)

Prices as a result have gradually eased upwards (as we outline below) and, with the backdrop of a recovering global economy and continuing reduction in Chinese illegal exports, "prices could rise further into next year if Beijing continues to tighten the screw," Burns said.

Key Price Drivers of the REE Index

Yttrium prices rose 5.7 percent after rising the previous month. After rising the previous month as well, europium oxide prices rose 4.3 percent to $800.50 per kilogram. Terbium metal jumped up 4.3 percent this month. Terbium oxide prices increased 1.3 percent, while neodymium ticked up last month by 1.2 percent. Lanthanum oxide increased only slightly. Prices for cerium oxide remained constant this past month. Neodymium oxide prices fell 2.7 percent after spiking the previous month. Following a 2.3 percent decline in price, dysprosium oxide finished the month lower.