REE price forecasts – another view

There’s been considerable, and energetic, discussion on RareMetalBlog for the past few weeks on demand and price outlooks for the REE sector. Well, here’s another scenario. Toronto-based CIBC World Markets has thrown its forecasting hat into the ring.

The detailed report has broken the elements down into three groups. Under “Bullish”, CIBC lists praseodymium, neodymium, terbium and yttrium. “Neutral elements” are lanthanum, europium, dysprosium and gadolinium. And the “bearish” ones are cerium and samarium. The placing of dysprosium might come as a surprise to some.

Now let’s get down to cases. These are CIBC’s projections ($US per kilogram):

                                                        2010             2013                 2015

Yttrium                                     $26.07         $107.60             $67.25

Lanthanum                              $22.53         $17.49                 $17.49

Cerium                                       $21.52         $16.60                 $12.45

Praseodymium                      $46.44         $120.32             $75.20

Neodymium                            $47.56         $122.85             $76.78

Samarium                                 $16.62         $18.00                 $13.50

Europium                                 $552.89        $1,392.57          $1,392.57

Gadolinium                              $22.29         $54.99               $54.99

Terbium                                    $537.02     $1,055.70        $1,055.70

Dysprosium                             $229.36     $688.08             $688.08

Now, I have not included the recent spot prices set out in the CIBC report, even though they are, in some cases, considerably higher than those obtaining in 2010. Moreover, these projections were obviously done before the Japanese disaster, so we simply don’t know the implications for the world economy and, therefore, demand.

CIBC also sets out the companies it classifies as “select investable deposits in development outside China”. It will give readers a snapshot picture of when, in the report’s opinion, each mine is likely to come online (although these may vary from the individual companies’ own estimates).

2011: Mt Weld (Lynas Corp)

2012: Mountain Pass (Molycorp)

2013: Nolans (Arafura Resources)

2014: Dubbo (Alkane Resources)

2015: Zandkopsdrift (Frontier Rare Earths), Bear Lodge (Rare Element Resources), Nechalacho (Avalon Rare Metals), Strange Lake (Quest Rare Metals) and Kvanefjeld (Greenland Minerals & Energy).

Not available: Holdas Lake (Great Western Minerals), Steenkampskraal (Great Western Minerals) and Norra Kar (Tasman Metals).

Then CIBC addresses the question: is there a REE bubble?

“We would argue that, if this is indeed a bubble, there is still plenty of room for even higher prices given that, on average, rare earths oxide prices delivered to China have risen 706 per cent,” the report continues. “Compare this to uranium’s nearly 1,300 per cent run from 2003 to 2007.” They continue: because the REE products are predominantly tailored to customers’ ultimate specification, the lack of a standardized product may make it difficult for speculators to enter the market and, if they do, it will be even more difficult to get out. The conclusion is that the high prices have been driven by end-user stockpiling.

CIBC also sets out how it believes the REE market should be played.

Looking at the fastest-growing markets, combined with limited supply over the next 10 years, sees yttrium and terbium with a forecast 30 per cent per cent compound annual growth rate (CAGR) between 2010 and 2015; praseodymium, neodymium and dysprosium at a 16 per cent CAGR.

CIBC believes Molycorp will generate significant leverage to neodymium and praseodymium, while Avalon’s Nechelacho deposit represents the best way to play HREE as its deposit is 25 per cent weighted to elements such as terbium, dysprosium and yttrium. Frontier Rare Earths will have more leverage to the battery metals, the report said.

Disclaimer: the views and forecasts here are just a summary of parts of the CIBC report and should not be considered a recommendation by the writer.