The inevitable impact of the Coronavirus on the world’s rare earths supply.

Critical materials-based supply chains may be hanging by a thread, the thread of the size of existing Chinese inventories.

The coronavirus outbreak in China has had a foreseeable but unintended consequence. Truck drivers have refused to make deliveries into areas either identified as or suspected of harboring the disease.

This has interrupted not only the flow of minerals out of the affected areas but also the refining and manufacturing of metals, food, and fuel. Among the under-reported deficiencies thereby caused the most important ones for the global rare earths production and utilization industries is the interruption in the flow of chemical reagents necessary for refining rare earths and for producing metals, alloys, and magnets.

It cannot be overemphasized that the shutdown of a supply chain on purpose is time consuming, and its re-start even more so. Supply chains are not turned on and off with the flick of a switch.

The dependence of American and European manufacturing on the just-in-time delivery of components means that their industries maintain limited or even non-existent inventories. We do not know much about Chinese inventories, but we do know that they cannot be infinitely large.

If the coronavirus outbreak continues, we will soon learn a lot about the size of Chinese inventories providing, of course, that export from China does not also shut down (It is certainly slowing down).

Rare earth enabled components for moving machinery, such as automobiles, trucks, trains, aircraft, industrial motors and generators, home appliances, and consumer goods, almost all today come from China or Japan (which of course gest its rare earth magnets, alloys, phosphors, and catalysts from China). That flow is now slowing. This will have a domino effect on American and European industry. These items cannot be re-sourced due to China’s monopoly of rare earths production and its monopsony of rare earth enabled component manufacturing.

We were told that even if the Chinese stopped the flow of rare earth enabled products to the USA in retaliation for tariffs it wouldn’t matter. I said at the time that it would indeed matter.

Now we may have to face the consequences of such an interruption even if our countries have an amiable (or, better said, convenient) trade relationship.

There is an urgency now for the creation of a total domestic rare earth end-use products supply chain in the USA, Europe, and non-Chinese Asia.

The anchor of any such supply chain is a working mine-in this case many more than one, since we need both light and heavy rare earths, which are not usually found together in accessible, developable deposits.

The US Army’s choice of vendors for its rare earths production solicitation is now more important than ever — the best projects must now be prioritized for development.

A domestic North American rare earth industry is now more important than ever.

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15 responses

  1. Rare Earths Investor Avatar
    Rare Earths Investor

    I think the trade confrontations had already led to a number of manufacturers related to critical metals needs deciding to diversify their resource needs and production partially out of China, or at least having second thoughts about increasing their presence there. Now, as you indicate they have reasons to look at the logic of allowing themselves to accept Chinese dominance in the future; especially, if the Chinese can’t get a quick handle on this type of Black Swan event within their borders.

    1. Jack Lifton Avatar
      Jack Lifton

      The main problem with “black swan events” in this context is that the come in various sizes that have very different consequences from insignificant to game-changing. The average investor does not understand that the world of manufacturing is not a supermarket where everything needed is in easy reach and priced so as not to diminish the demand. Supply chains are, in fact, like living organisms. All parts must function together at some basic level for the end-use product to be able to be sold. In this case, today, all products requiring critical materials, such as rare earths, can only be produced when the logistics system of the monopoly producer, the circulation system of the supply chain, is function. When trucks and/or trains stop moving the supply chain has a break down. It is no longer connected. I am told that this, in fact, has happened within China within the affected areas. I suggest we watch rare earth and other critical metals’ prices within China for an indication of just how bad the situation is becoming. Of course there will be speculators bumping up spot prices, so I suggest looking at contract prices. These contract prices are extremely difficult to find in China, but it is not impossible to do so. I will try to follow them and report back.

  2. alex Avatar

    I think we have to look Lynas prices, they have to supply Japanese 50% of output
    If China will stop supply because of coronovirus all buyers will come to Lynas for NdPr
    Who ‘ll get supply USA, France or Germany Company after Japan ?
    Lynas able to produce only 5000 tones of NdPr

    1. Jack Lifton Avatar
      Jack Lifton

      Lynas may be able to redirect the 40% of its output now already going into China, but this will depend on whether or not its Chinese (Japanese in China?) Customers are honoring their purchase contracts. I note that Silmet (Neo Performance Materials) uses Russian rare earth originated concentrates, so that it can continue to operate. Sadly the non Chinese world has insufficient metal and alloy capacity to process all of Lynas’ output, so if China were out of operation non Chinese magnet and catalyst production dependent on just in time supply would cease. This might only be the tip of the global critical metals’ iceberg and Western economies may be on a collision course.

      1. alex Avatar

        What about Mountain Pass – MP Materials (former Molycorp) – may be they can add NdPr to the market if prices will rise ?

        1. Jack P Lifton Avatar
          Jack P Lifton

          The output of the Mountain Pass mine, which the USGS estimates at an astounding 26,000 tons in 2019 (ore and compounds[?]), but which the company has stated is more than 50,000 tons, is entirely consigned to China’s Shenghe Resources, which has mining engineers and miners on site in California. None of this material, as far as I can discern, is directly entering the non-Chinese markets.

  3. POL LE ROUX Avatar

    A few corrections to above statements and comments:
    Lynas is producing 7200 tons per year of NdPr (25% of it as separated Nd and Pr). Not 5000tons which was the case years ago.
    The total demand of NdPr outside China represents 60% of Lynas production capacity.
    The metal and alloy making capacity outside China is aligned with Lynas oxide production capacity.
    Conclusion (repeated again and again): The outside world needs to develop additional capacity of magnet making. Otherwise, any additional gram of NdPr produced outside China will go to…China. Maintaining the market price in China low, hence the gloabl market price since China market price is the reference.
    Mistake, misunderstanding or hidden objective of some commentators

    1. Ossie Avatar

      Hi Pol
      Looking at Lynas quarterly production report for period ending 31 December 2019 it appears Lynas is not producing 7200t NdPr in a year. The FY19 total NDPR production was 5898t. Can you please clarify why there is such a discrepancy between the companies quarterly production report and your statement above?

  4. Tracy Weslosky Avatar
    Tracy Weslosky

    we just published an interview with Jack on this topic that you may access at the following link:

  5. POL LE ROUX Avatar

    I used present time, not past, i.e not referring to past but current performance

    1. Ossie Avatar

      Thanks for clarifying Pol

  6. Dougie Avatar

    Jack – wouldn’t this be an opportunity for the US gov’t and Lynas to put pressure on Malaysia to increase the 7200t NdPr output as an extraordinary event to assist? PS: what happened to the Army assistance whatever form that is supposed to take that was supposed to be announced?

  7. Dougie Avatar

    Jack – wouldn’t this be an opportunity for the US gov’t and Lynas to put pressure on Malaysia to increase the 7200t NdPr output as an extraordinary event to assist? PS: what happened to the Army assistance whatever form that is supposed to take that was supposed to be announced?

  8. OpenEyedAmerican Avatar

    The minute this piece went directly from a discussion of rare earths to the US Army, it sounded dumbed-down to the masses. Yes, we need rare earths but the US Military is the LAST industry we should consider prioritizing for the supply chain. We already “invest” more than half the world combined on the military which has resulted in our national ranking very low in global peace today. As a former Silicon Valley executive myself, I saw firsthand how we’ve dangerously wrapped the DoD around our high-tech sector in the deceiving marketing spin of “national security.” Where has that got us today? An entire economy is shut down due to the China-USA trade war, a rather mysterious virus with geopolitical links, and perpetual wars and mass shootings. Focus the supply chain instead on clean energy, clean air, clean souls.

  9. Jack Lifton Avatar
    Jack Lifton

    The real market in the USA for rare earth enabled components is the consumer product’s space. Automobiles, aircraft, trucks, motor scooters, home appliances, computers, lighting, cellphones, and the like depend on rare earth permanent magnets. Direct drive wind turbine generators also depend on rare earth permanent magnets and solar cells need cadmium telluride and gallium arsenide along with silicon. We import 95% of our uranium fuel needs. The point is that we pay countries like China to pollute and use forced labor to produce key critical materials and components just so A few American financiers can directly benefit. This must end.

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