Urgent need for non-Chinese capacity

China, the dominant global supplier of rare earths, has put strict controls on its mining, production and export in order to maximise its own use of its resources. As a result, the past 3 years have brought fundamental change to the global industry, taking it from oversupply to demand shortages.

During the 1990s and early 2000s, significant over-production and low prices led to most non-Chinese rare earth producers shutting down their operations. As a result, from 2004-2007 China has supplied 90-95% of global demand. Now, with reduced exports from China and continued growth in demand elsewhere, the supply-demand mismatch is causing great concern to other countries and they are anxious to support new sources of rare earths. With high prospects for growth in rare earth's end-use sectors, and forecast demand growth of 8-11%py, there is a pressing need for new non-Chinese capacity in the next 3 to 4 years. This has focused attention on the re-opening of the Molycorp operation in Mountain Pass, the probable increased production of loparite from the Kola Peninsula, Lynas Corporation's plans to process Mount Weld ore in Australia and other potential sources such as the projects at Nolans, Hoidas Lake and Thor Lake.

On the basis that China will adhere to the announced production limits, there is a real prospect that within 5-10 years the country will only be meeting its domestic needs. To meet the estimated global demand of 180-190,000t REO in 2010, around 40,000t of new capacity will be needed to meet the unfulfilled demand from outside China.

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