Minor Metal Market Outlook 2011

It is probably appropriate that 2010 comes to an end with rare earth back in the headlines, as it was the year of REEs. Severe export quota decreases drew headlines around the world and institutional investors into the market, resulting in exponential price increases and encouraging what seemed like every junior mining exploration and development company to add REEs in their taglines. As companies outside of China raced to get their hands on as much rare earth as possible, investors’ eyes lit up at the projected growth figures for hybrid car sales and wind turbine energy production by 2020 and beyond.

But what about 2011? Will REEs continue to be the headline-makers, or will demand for flatscreen TVs and continued growth of CIGS solar technology push indium into the spotlight? Will antimony prices remain at record levels? And what impact will rising production costs in China have on minor metal prices?

After looking into our crystal ball, we have come up with five projections on what minor metal markets should expect in 2011. Enjoy, let us know what you think, and – most importantly – Happy New Year!

1.    Rare Earth: More Headlines, Less Action:
With the increased public investment in REEs, and an impending WTO case against China’s REE export restrictions, it is safe to expect these elements to continue to be the headline-makers in 2011. But with inventories built-up by traders and end-users in the face of rising prices in 2010, and with many end-users hesitant (or unable) to invest more capital in inventory at the current prices, sales of REEs will likely slow in 2011. Although prices will remain high, 2011 will be a year of adjustment for the industry, allowing users to adapt to new input costs and make tough decisions over whether production can be sustained at the new cost, whether production must be moved to China or whether rare earth inputs can be substituted for more cost-effective alternatives.

2.    Inflation, Inflation, Inflation:
One common theme amongst all of our market reports in 2010 was the impact of rising inflation on minor metal markets. The combination of a massive post-financial crisis stimulus package in China along with the consequent loose monetary policy in the United States and a rigid RMB-USD exchange rate have led to a domestic inflation rate much higher than the authorities in Beijing are willing to acknowledge. Rising labour and energy costs in China – the world’s largest primary producer of minor metals – combined with uncertainty about the US dollar, means that inflation will likely be the economic story of 2011. This will push international prices for minor metal upwards – starting with those that are heavily dependent upon Chinese production.

3.    Antimony – More of the Same:
Following the supply disruptions and price increases in 2010, antimony end-users are still adjusting to the new input costs. Without any major policy changes expected from China, and limited new resources coming into production, antimony buyers can expect prices over US$ 10,000/mt to continue through 2011.

4.    The Return of Photovoltaics:
Prior to the financial crisis in 2008, triple-digit oil prices had investors excited about the opportunities in alternative energy technologies. But since 2008, many of these sectors have suffered following the return of low energy prices. Small and medium-sized players, in particular, have again become more reliant on government subsidies, only to find Western governments reluctant to spend in the wake of sovereign debt defaults in Europe. This has had a strong impact on the demand for a number of minor metals, particularly those sensitive to demand from the photovoltaics industry; indium, germanium, gallium and tellurium. However, we expect this to change in 2011. With energy prices continuing upward and greater investment in green energy infrastructure projects – particularly in China – demand for all these metals will receive a boost. Combined with declining inventories, price increases of greater than 20 percent may be in store in 2011

5.    Limited Resources Continue to Drive Zirconium and Selenium Prices:
With growing demand outpacing the development of new resources, selenium prices rebounded sharply in the first half of 2010. Although prices stabilized by the third quarter, limited production will likely ensure that prices remain above $50/lb in 2011. The zirconium market is facing similar pressures, with growing demand confronting limited development of new resources. The result will be zirconium prices continuing to move higher in 2011.

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[Terence Bell]

Dramatic fall in China rare earths exports
23 May 2011

BEIJING (Reuters) -

China's exports of rare earths fell by more than half in April from a year previously, detailed Customs data showed on Monday, despite headline official data that indicated a rise of 46 percent.

http://www.mineweb.com/mineweb/view/mineweb/en/page89154?oid=127701&sn=Detail