Oil and Gas 360
(Wall Street Journal)-The three-year bear market for rare earth minerals shows little sign of abating as market-dominant China continues to meet rising state-run production quotas despite falling prices. The intentional glutting is a long-used strategy to quell competition and investment in rivals.
Feeling the brunt is one of the world’s biggest rare earth miners outside of China, MP Materials of California; its stock is down over 35% in the last year.
Rare earth minerals have gained in profile as a matter of geopolitical strategy over the last several years, given their importance to defense and space technologies. For instance, the Journal article notes that the U.S., U.K., European Union, Canada and Australia have added “critical minerals” to their list of global risk assessments.
The Biden administration has looked to support domestic rare earth mineral mining by incentivizing domestic mining and processing through Inflation Reduction Act subsidies while also imposing a 25% tariff in 2026 to address Chinese price dumping. China has in the past responded to attempts to level the playing field with embargoes.
China not only produces about 60% of the world’s rare-earth minerals, it’s monopolizing supply chains through vertical integration. It controls nearly 95% of global magnet production, giving the country almost unbridled pricing power.
Magnets are a fundamental component to most sophisticated technologies today such as magnetic resonance machines in hospitals, computers and weapons systems, generators and turbines. China also has an export ban on its rare-earth processing technologies.
Other price headwinds, according to The Journal, include slower-than-anticipated progress on the energy transition, the initiative pronounced by many governments of the world to generate more low carbon energy through renewable resources while addressing health and environmental impacts.
Lithium, perhaps the rare-earth mineral most familiar to most people, is no outlier, despite its importance to growth industries like ion and metal batteries, heat-resistant glass and ceramics manufacturing, flux additives to iron, steel and aluminum manufacturing, electric vehicles and mobile phones.
Like the rare-earth mineral category overall, it’s seeing some of the lowest prices in the last three years. Despite low prices, China says it plans to double lithium production in the years ahead.
By Jim Felton for oilandgas360.com
