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Global rare earth market over-prosperity Goldman Sachs said that supply exceeds demand after two years
In 2013, will the global rare earth market exceed supply? Goldman Sachs analysts predicted in a recent report that as Western companies set up new mines to compete with Chinese companies that currently dominate the market, by 2013, rare earths may be oversupplied. According to the "Wall Street Journal" reported on the 9th, this view quickly won the recognition of some market participants, that the rare earth market has been "excessive prosperity." Of course, there are also many people who hold the opposite view. Curtis, the chief executive of Australian rare earth miner Linus, even predicted that “China is about to become a net importer of rare earthsâ€. At present, China supplies about 90% of the world's rare earths. Goldman Sachs analyst Sans Wood predicted in this report that the global rare earth supply will have the biggest gap in history this year, possibly reaching 1.8734 million tons, equivalent to 13.2% of demand, but the gap will continue to shrink until 2013. In the case of oversupply, in 2014, the excess will reach 5,860 tons, equivalent to 3.2% of the expected demand. He also believes that the price of rare earth is approaching the peak and then there will be a downward trend. Rare earth is a combination of 17 elements. Global rare earth prices have quadrupled last year and have doubled in the first four months of this year. Among them, the rare earth mine “钕†used to manufacture products such as earphones and hybrid electric vehicles has risen sharply from about US$42 per kilogram a year ago to more than US$283. The key raw material for the manufacture of missiles, "é’", also soared from $18.50 per kilogram last year to more than $146 per kilogram. Right now, Goldman Sachs said that the "supply exceeds demand" of rare earths, many market participants agreed. According to the "Wall Street Journal" reported on the 9th, "these people think that the current rare earth market is excessively prosperous." The report quoted a rare earth trader in Europe as saying that for rare earth elements such as lanthanum and cerium, there will certainly be a situation of oversupply. Reasons for supporting this view include: the price is too high, people will immediately start looking for alternatives; as more rare earth mines are restored, supply will increase significantly. At present, California is increasing the rare earth mining in a large scale. The US rare earth production is expected to increase from 3% to 4% in the world to 12% in 2012. Japan's Hitachi Metals Co., Ltd. also plans to expand rare earth mining, and South Korea has reached an agreement with Myanmar to jointly develop rare earth resources in Myanmar. However, can these actions significantly increase the global supply of rare earths in the short term, and thus reverse the current supply and demand situation in the market? According to a report in the New York Times last week, rare earths will still be in short supply in the next few years, regardless of smartphones or smart bombs. According to the report, China will not only continue to control export volume despite international pressure, but also increase rare earth imports, because China’s own rare earth consumption is also increasing, and the international community’s exploration work in places such as Malaysia has just started. And will encounter opposition from the environmentalists, which has already appeared in Kuantan, Malaysia. In addition, the ambitious electronic recycling products of Toyota and Other Japanese companies are refining the rare earths. Due to the multiple difficulties in technology and commerce, the progress is far less than expected. According to a report by Bloomberg on the 5th, some members of the United States have proposed to establish a “strategic inventory of rare earthsâ€. If it starts and triggers countries to follow suit, the price of rare earth will soar in the short term. The report also quoted analysts as saying that China's reduction in rare earth exports pushed up prices is only a symptom, the essence of which is "the rapid growth of rare earth demand", although Molycorp, such as the largest domestic rare earth supplier, tried to re-establish rare earths that are not dependent on China. The industrial chain is committed to supplying 20,000 tons of rare earths by the end of 2012, but "this may not be able to fill the new gap created by the surge in demand for rare earths." In addition, the Wall Street Journal quoted Linus’s chief executive, Curtis, as saying that “China is about to become a net importer of rare earth elements, which may be similar to the global coal market in 2009 and the oil market in the mid-1990s. The big transformation may make the current price increase even more fierce." In 2009, China became the net importer of coal for the first time from traditional coal exporters. Curtis believes that China's domestic consumption will drive a huge increase in demand for these resources. Jiang Yong, director of the Center for Economic Security Research at the China Institute of Contemporary International Relations, told the Global Times reporter that it is difficult to judge directly on the two views of the bullish and bearish rare earth markets, but it can be analyzed from the fundamentals. He said that rare earth prices will not be as ups and downs as commodities such as oil and coal. In addition, although the price increase of rare earth will stimulate production and increase supply, this process will not be very fast, because unlike petroleum and coal mining, rare earth has certain radiation, and the technical requirements for rare earth mining and storage are high. From mining to turning rare earths into commodities, there is information that takes about five years. In addition, as a strategic resource, rare earths are still rigid and demand will continue to grow. At present, the world's rare earth reserves are limited, the rare earth futures market is immature and lacks speculation. Therefore, the supply and demand of rare earths are inelastic and there will be no sharp rise and fall. There is still room for growth in rare earth prices in the future. In addition, Jiang Yong also told reporters that as a large investment bank, Goldman Sachs should not easily publish a report. However, there are many facts that finally explain that as a speculative force, Wall Street's investigation is not completely credible.