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Friday, October 26, 2012

Rare Earths

I posted before about my enthusiasm for Rare earth metals.  Since then, much has changed in market prices, collapsing with the economic downturn.

That is a huge issue with natural resources, when economy is picking up, even moderately, resource stocks are fan-tastic.  The moment stocks lose momentum, stock prices can easily be cut by 50% in months.

I am still bullish on Rare earth metals long term for a few reasons.
1) The materials cannot be fabricated by alternate methods.  Companies may say they can, but at what cost of R&D?  Too much compared to just using whats available.
2) China produces 90% of rare earth supply to the world, but has 30% of the rare earth resources
    That gives too much power to China over such a key resources, I expect China to abuse this position.
    The net result of abuse will be at some point, higher prices and competitors entering market.
    It is the competitors I have interest in.
3) New tech, new materials will likely come from exotic materials.   These materials have not been used in earnest until recently.  

As for item 2, ran across article of China tightening rare earth production, and a desire to make production tightly government controlled.  Production has been cut this week to force prices higher.  While I don't expect a price jump immediately, this bolsters for item 2.

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