Japan calamity calls temporary hit for rare earth Reuters / Pittsburgh

March 16, 2011, 8:40 IST,,,,,,,,,,,,,The aftermath of Japan's disastrous earthquake and tsunami could hold down rare earth prices over the next month, but overall those prices are likely to remain elevated for the next few years, executives said.

Temporary closures of Japanese businesses, coupled with disruptions to ports and the electric grid as authorities struggle to stop the release of radiation from a quake-hit nuclear plant, may cause delays in shipments of the metals used in everything from Apple iPads to wind turbines. But few rare earth users are likely to turn away previously ordered materials in the face of continued export cutbacks by leading supplier China.

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"You're looking at something that probably has an impact of two to four months. We may see some relaxation in prices over that time, more as a knee-jerk reaction," said Jon Hykawy, rare earth analyst with Byron Capital Markets.

Over the long term, no rare earth users are likely to turn away shipments out of concern about the overall current short supply of the materials.

"Deliveries will go on, shipments will go on. There will be delays in processing," Hykawy said at the Asian Metal International Rare Earth Summit in Pittsburgh on Tuesday.

Western companies including Molycorp Inc, Lynas Corp Ltd, Great Western Minerals Group and Avalon Rare Metals are scrambling to redevelop mines capable of producing rare earth elements.

They are largely focusing on restarting mines that were idled at times when prices were lower, but look economical since China last year began reducing its rare earth exports.

Shares of rare earth producers sold off on Tuesday, amid a broad decline in US equities sparked by concerns about how Japan's disaster will affect world economic growth.

NOT 'IN THE MOOD'

For now, Japanese demand for rare earths has dried up, said one executive.

"We cannot call our customers right now and say, 'Do you want to buy something?' No one is in the mood ... So if 50% of the consumption of the world is in Japan and this 50% stops for a couple of weeks, or a couple of months, this will be a huge impact on the consumption side or the demand site," said Furkhat Faizulla, marketing manager from Advanced Material Japan Corp. "We will have to see the real situation in Japan in one week, two weeks, but maybe the prices will come down in the coming months."

But long-term demand is unlikely to be affected unless more of Japan's industrial core is affected by subsequent troubles, executives said.

"A large amount of the infrastructure in Japan is not on the coastal side of Japan, there's a lot inland," said Russell Starr, a partner in Euro Pacific Canada and an investor in the sector.

CHINA SHIFT?

Executives at the conference also wrestled with the question of whether China, which accounts for more than 95% of global rare earth production, but is estimated to hold just a third to half of the world's reserves, would eventually shift to become a net importer of rare earths.

Growing Chinese demand could have that country importing more rare earth than it expects at some point "beyond 2015," Great Western executive chairman Gary Billingsley said.

That was a similar to a projection made by Molycorp Chief Executive Mark Smith, who said he expected the gap between global demand and supply to be wider in 2011 than it was in 2010, when the boom began.

Pierre Neatby, vice president of

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