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INN: Where do you see prices heading for rare earths this year? What about in the medium term?

RC: Through the end of 2014 and the first quarter of 2015 traders and end-users of rare earths globally stocked up their captive supplies in advance of anticipated export tariff and resource tax changes in May 2015 that many were speculating would send prices higher. However, in doing so, this stocking up has since led to a lull in demand from traders and end-users globally, leading to the continuous erosion of Chinese domestic and export prices through the second quarter and into the third quarter of 2015.

That said though – we believe the rare earth prices being quoted at present are a reflection of very small and sparse transaction volumes taking place and are indicative of ‘bait’ prices aimed at drawing buyers back into the market. As end-users draw down the supplies amassed through the last quarter of 2014 and the first quarter of 2015 and begin re-stocking in late-2015 we believe prices will begin to rise accordingly and this upward momentum will carry into the first half of 2016.

Looking forward through 2020 we forecast that prices of all rare earth oxides will increase from present levels, although the increase will be modest for some and more aggressive for others depending on the supply-demand fundamentals anticipated for each respective oxide.

In our recent “Rare Earth Market Outlook Update” we forecast three prospective supply-demand-pricing scenarios for 2015 through 2020 that take into consideration recent tax and tariff changes in China, as well as uncertainty with Molycorp that could see the company cease production from its Mountain Pass mine by as early as next year.