iNVEZZ.com, Tuesday, July 16th: Rare earth stocks gained ground last week as officials in China continued to confiscate concentrate in an attempt to stem the practice of illegally mining the chemical elements used in defence, alternative energy and communications industries, Resource Investing News reported yesterday. China’s crackdown on illegal mining is also seeing as supporting rare earth prices in the near-term.
Rare Earth Stocks Gain
As Resource Investing News reported, the Market Vectors Rare Earth/Strategic Metals ETF (NYSEARCA:REMX), a collection of domestic US and foreign publicly traded rare earth companies, had gained 4.9 percent over the last five days, compared with a year-to-date loss of 24.8 percent. The Market
Vectors Rare Earth Strat Met ETF price closed marginally higher in New York yesterday. Molycorp’s share price (NYSE:MCP) added 23.2 percent over a week, whereas Lynas’ share price (ASX:LYC) rose 15.5 percent. Molycorp was upgraded to a “strong buy” from equities analyst Byron Capital last week.
Gains in rare earth stocks have been prompted by the efforts of the Chinese government to stem illegal mining of rare earths since 2012 when it stopped production of about 30,000 metric tonnes. China accounts for more than 90 percent of the global supply of rare earths, a group of 17 chemically similar elements widely used in high-tech products.
As China’s official news agency Xinhua reported last month, police in the eastern Jiangxi Province, the country’s major rare earth production base, had stepped up inspections of the sector. Xinhua also quoted the Ministry of Industry and Information Technology as saying that tougher measures would be launched this year to curb illegal mining and processing of rare earths.
Rare Earth Prices Outlook
The Chinese crackdown on illegal mining is also seen as supporting rare earth prices. As Shanghai Metals Market has reported, in the past couple of days medium and heavy rare earth metals have gained nearly 20 percent. While prices peaked in 2011 when China cut its export quotas, weak market demand and production overcapacity sent prices of some rare earths 50 to 70 percent lower last year.
Shanghai Metals Market has quoted industry insiders as saying that although rare earth prices might remain high in the near term, price gains might not be sustainable over a longer period of time due to sluggish downstream demand.
Molycorp’s share price was 0.15 percent up at $6.90 in pre-market trading in New York as of 07:34 EDT on 16 July 2013. Lynas’ share price closed 2.25 percent down at A$0.435 in Sydney on July 15. The Market Vectors Rare Earth Strat Met ETF price closed 0.38 percent higher at $39.95 in New York on July