Welcome To the Stock Synergy, Momentum & Breakout HUB On AGORACOM
Edit this title from the Fast Facts Section
Message: Rare earth prices fall as Toyota announces it will use less
Rare Earths Fall as Toyota Uses Alternatives
Shannon Song, Neo Material Technologies Inc.'s vice president of Magnequench Tianjin Co., holds up a vial of NdFeB powder at the Magnequench factory in Tianjin, China. Photographer: Doug Kanter/Bloomberg
Sept. 26 (Bloomberg) -- Mark Smith, chief executive officer of Molycorp Inc., talks about China's rare earth metals' production and exports. Smith also discusses Molycorp's Mountain Pass, California, project. He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)
Enlarge image
CHINA RARE EARTHS WEAPONS
Nelson Ching/Bloomberg
Neodymium is displayed at the Baotou Steel Rare-Earth Hi-Tech Co. factory in Baotou, Inner Mongolia, China. Makers of electric cars, wind turbines and oil-refining catalysts have sought to reduce use of the metals after China said in July 2010 that it would cut exports and clamp down on the industry.
Neodymium is displayed at the Baotou Steel Rare-Earth Hi-Tech Co. factory in Baotou, Inner Mongolia, China. Makers of electric cars, wind turbines and oil-refining catalysts have sought to reduce use of the metals after China said in July 2010 that it would cut exports and clamp down on the industry. Photographer: Nelson Ching/Bloomberg
Rare-earth prices are set to extend their decline from records this year as buyers including Toyota Motor Corp. (7203) and General Electric Co. (GE) scale back using the materials in their cars and windmills.
Prices for cerium and lanthanum, the most abundant rare-earth elements, will drop by 50 percent in 12 months, Christopher Ecclestone, an analyst at Hallgarten & Co. in New York, has forecast. Neodymium and praseodymium, metals used in permanent rare-earth magnets, may fall as much as 15 percent, he said.
Makers of electric cars, wind turbines and oil-refining catalysts have sought to reduce use of the metals after China, which supplies more than 90 percent of the market, said in July 2010 that it would cut exports and clamp down on the industry. That boosted prices, encouraging mining companies to develop new prospects and buyers to find alternatives.
“If you think you can keep raising the prices for those materials and still keep your customers, you’re crazy,” Jack Lifton, co-founder of Technology Metals Research, said in a telephone interview. “The principal customer for rare-earth metals is a global automotive industry using rare-earth permanent magnets. That industry will engineer this stuff out.”
Declines in August and September pared a five-month, fourfold surge that brought the average price for eight of the most widely used rare-earth oxides to a record 396,850 yuan ($62,068) a metric ton in July, data from consultant Shanghai Steelhome Information show. The average price declined 13 percent from its July peak as of Sept. 27.
Share Performance
The Bloomberg Rare Earth Mineral Resources Index dropped 41 percent in the last three months, led by a 60-percent decline in Montreal-based Quest Rare Minerals Ltd. (QRM) Great Western Minerals Group Ltd., which explores in North America, climbed 4.6 percent in the period and is the only gainer on the 17-member benchmark.
Rare earths have been pushed lower because of selling by speculators, Michael Gambardella, a New York-based analyst at JPMorgan Chase & Co., said in a report last week. Tsunami-related disruptions in Japan and dumping of unpermitted material in China have undercut prices, while industrial substitution has driven “demand destruction,” said Sam Berridge, a Sydney-based analyst at Royal Bank of Scotland Group Plc.
“A greater focus on recycling and substitution, particularly by Japanese consumers, has resulted in tightness of demand easing somewhat for the lighter rare earths,” Berridge said by phone.
‘Huge Savings’
Rising prices for the so-called light metals, such as neodymium and lanthanum, have prompted automakers including Toyota, Asia’s biggest automaker, to look at reducing the use of relatively powerful and expensive rare-earth magnets in their vehicles. Some Toyota vehicles will be built with an induction motor, which doesn’t use rare-earth magnets, said John Hanson, a Toyota spokesman in Torrance, California.
“Moving from a fixed-magnet motor to an induction motor is a huge savings with regard to rare-earth metals,” Hanson said by phone.
“The Japanese are leading the push to replace, reduce and recycle their rare-earths consumption,” said Dudley Kingsnorth, chief executive officer of Perth-based advisory Industrial Minerals Co. of Australia. “Users are recycling rare earths wherever they can, using them more efficiently, particularly in the magnet industry where they are producing powerful magnets with smaller volumes.”
GM’s Plans
General Motors Co. (GM), the largest U.S. automaker, plans to sell a Chevrolet Malibu Eco next year that uses an induction motor, and otherwise cut down on magnets that use a lot of rare earths.
“The magnets are like God’s gift to electric motors,”Pete Savagian, GM’s chief engineer for electric motors, said in a telephone interview. “But we don’t always need that level of magnet. Even at prices we saw three and four years ago, there’s a more economic alternative, albeit at slightly less efficient outcome.”
The largest portion of demand for rare earths, one third, comes from generating electricity, according to Bloomberg Industries.
In August, GE announced the development of wind-turbine generators that will reduce dependence on the rare-earth materials prevalent in so-called permanent-magnet machines. Some current offshore wind turbines may contain as much as half a ton of the metals, according to Bloomberg Industries analysis.
Gasoline Refining
“Everybody is going back to the drawing board and trying to redesign their generators to minimize the usage of permanent magnets,” said Steve Duclos, chief scientist and manager of material sustainability for GE Global Research. “In all of our businesses we’re looking to reduce our usage.”
W.R. Grace & Co. began selling this year an oil-refining catalyst with reduced lanthanum, a rare earth that has increased in price more than fourfold in the past year. Lanthanum improves the amount of gasoline refiners can extract from crude oil and is also used in hybrid-car batteries.
Half of the company’s customers had switched to the new formula, which offers the same performance and gives them“double-digit type percent decreases in their cost,” Grace Chief Financial Officer Hudson La Force III said on a conference call this month.
The development doesn’t worry Mark Smith, CEO of Molycorp Inc. (MCP), owner of the largest rare-earth deposit outside China.
New Mines
Fluid-cracking catalysts have “always been one of the largest single markets for any of the individual rare earths,”Smith said in an interview at Bloomberg headquarters in New York. “We don’t see that deteriorating in any significant form.”
While rare-earth prices have fallen, demand will outpace supplies even with new mines in California and Australia expected to come online in 2014, Smith said.
“Like any market, you’re going to see up and down in the course of a month or two,” Smith said. “But the overall trend remains short supply, heavy demand.”
The ability to substitute many rare-earth applications will be limited, said Constantine Karayannopoulos, CEO of Neo Material Technologies Inc. (NEM), a Toronto-based producer of rare-earth magnets.
“All kinds of folks are trying to use alternative technologies,” he said by phone. “Longer-term, don’t expect these technologies to be in place this quarter or the next.”
GE’s Duclos says he has little doubt companies will find substitutes, sooner or later.
“It will depend on the element, it will depend on the usage, but getting 10-20 percent efficiencies out of the usage of an element is not that terribly difficult,” Duclos said.“What I don’t subscribe to is this idea that there’s nothing we can do.”
New Message
Please
login
to post a reply