China to Stockpile Rare Earth Metals

Posted Mar 8th 2011 10:40AM by Connie Madon
Filed under: International Markets, Commodities

China plans to stockpile rare earth metals, according to The Wall Street Journal. While these plans haven't been made public, the WSJ reported Monday the efforts have emerged from recent statements. Rare earth metals are comprised of 17 elements, used in the manufacture of laser guided weapons and hybrid car batteries.

Last year, China imposed an export ban on rare earths. This new move is going a step further. The ensuing shortage of these metals will increase production costs on a variety of industries including cellphones, oil refining and high technology batteries.

News of China's stockpile spread rapidly. U.S.-based company Molycorp (MCP) shares spiked higher to $51.50 in Monday's trading, then pulled back along with oil prices to close at $47.70. Australian mining company Lynas (LYSDY) closed at $21.35.

Both companies have had a spectacular run. The 52-week high and low for Molycorp is $62.80 and $12.10, respectively. For Lynas, the 52-week high and low are $26.30 and $3.80 respectively.

Word of China's stockpile is causing concern in the U.S. Congress as the country controls more than 90% of current global supply. Representative Mike Coffman plans to introduce a bill that would require the U.S. military to hold a specified amount of rare earths. The governments of Japan and South Korea are also exploring stockpile programs.

China exported more than 39,813 tons last year. This is why the strategic importance of these elements has garnered the title '21st century gold.'

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