Over on our sister site, MetalMiner, my colleague Stuart Burns recently explored declining prices for certain classes of light rare earth metals (read his full commentary here and here). Not too long ago, we were all reading headlines about China erecting export restrictions to prop up prices. What's changed?
According to Stuart, "the greatest movement has been in the lighter rare earths, which are also the most plentiful. Most observers believe they have the furthest to fall, as heavier rare earths will be supported by still-constrained supply." Stuart observes in summary that "the benefit for rare earth consumers will be lower overall prices, and for the rest of us, the possibility of new products exploiting the advantages of the lower-cost lighter rare earth metals. Indeed, almost uniquely in the metals markets, one of the key dynamics in the future could be new technological developments for these lighter metals arising from their lower cost, creating spikes in demand."
While there are several geopolitical and economic reasons that China is losing some control over the ability to prop up the pricing of certain metals, which Stuart explores, the broader question organizations should be asking is whether or not China will be able to maintain the level of general market manipulation it has across its industrial export base (raw materials and finished products included). If China's ability to wield puppet hands over the control of exports through skillful currency management, internal production incentives, VAT rebates and other means declines, markets for commodities -- let alone products further up the value chain -- could face a chaotic ride.
Spend Confucius says: Sooner or later the invisible hand will slam down on red wrist.