India Inches Into the Rare Earth Market

India Inches Into the Rare Earth MarketTo say China is the main player in the rare earth element (REE) space is, of course, an understatement. The country lost an appeal regarding a World Trade Organization ruling on its REE export restrictions last month, but it still controls the lion’s share of the market; that means any indication that another entity might take a piece of the pie, however small, is definitely worth some attention. 

According to Reuters, India is commissioning a plant that will produce up to 5,000 tonnes of REEs annually. S. Surya Kumar, head of state-owned Indian Rare Earths’ Rare Earths Division, has not given a timeline for the plant’s development, but did say that it will be located in Odisha and will produce rare earth oxides by processing monazite from beach sand.

Once the plant is up and running, India could stand to contribute approximately 5 percent of global supply.

Interest from Japan

Japan, like the rest of the world, relies heavily on China for REEs. However, the resource is even more important for the island nation as REEs are necessary for the production of the electronics and computerized systems that make up a substantial portion of Japan’s exports.

It isn’t surprising then that a subsidiary of Japan’s Toyota Tsusho (TSE:8015) has a hand in the newly commissioned Indian plant. Indeed, it’s already entered into an agreement for half of its anticipated production. The partnership between the two looks to be going well so far, as the International Business Times reported that Indian Prime Minister Narendra Modi met with Japan’s Shinzo Abe this week to discuss the contract further. Japan has also committed to doubling its overall direct investment in India over the next five years.

Overall significance

In an August 26 article from TradingFloor.com, Adam Courtenay suggests that REE companies such as Lynas (ASX:LYC) and Molycorp (NYSE:MCP), which have tried to take a run at China in the past, have more or less failed to do so. That’s because at the end of the day, China is still able to steamroll those companies by dramatically increasing supply to kill prices.

However, Courtenay also states that the very existence of those companies “now means China’s monopolistic stranglehold is broken,” and that idea could easily be extended to India as well. The country’s 5 percent of global production may pale in comparison to China’s 90, but it’s significant in that India will be giving Japan an alternate source for some of its REEs, putting a small, but still respectable, dent in Japan’s dependence on China.

REE investors will no doubt be watching to see how the partnership plays out, especially in light of last month’s ruling.

Company news

Last Monday, NioCorp Developments (TSXV:NB,OTCQX:NIOBF) reported additional high-grade results from ongoing drilling at its Elk Creek project, located in Nebraska. Previously, assays returned results grading over 3-percent Nb205, with final results including individual samples of over 4 percent. NioCorp CEO Mark Smith said that the results confirm NioCorp’s belief that Elk Creek “truly is a world class deposit.”

Also last week, Rare Element Resources (NYSEMKT:REE,TSX:RES) released the prefeasibility study for its Bear Lodge project in Wyoming. The company significantly expanded the mineral resource at Bear Lodge and has developed a proprietary process that “consistently produces a 97+% pure, near thorium-free TREO concentrate in repeated pilot plant testing.”

 

Securities Disclosure: I, Teresa Matich, hold no investment interest in any of the companies mentioned in this article.