Setting The Record Straight

Earlier this week a conference was held in Washington D.C. on Technology and Rare Earth Metals, which I was unable to attend due to other commitments. I was, however, contacted during the meeting by a number of people asking for clarification on some comments made by Dudley Kingsnorth, the Australian rare earths specialist. Mr. Kingsnorth apparently took issue, while on the stage, with comments that I made in December 2009, in which I said that he had predicted that China would not be able to meet its internal demands for rare earths in the near future. I would like to take this opportunity to set the record straight on this matter, and to hopefully put this minor controversy to rest.

Readers of The Jack Lifton Report who have been with me since launching the site in the fall of 2009, will recall that I published an article on October 15, 2009, available for download to subscribers only, called “The Rare Earth Crisis of 2009”. In this article, on the subject of the alleged existence of a report in China on restricting exports of rare earths, I said the following:

“The problem that has been exposed by the “discovery” of the memorandum on rare earth export allocations is that it proves the conjecture highlighted by well-known Australian rare earth specialist, Dudley Kingsnorth, that Chinese domestic demand for rare earths is rapidly catching up to Chinese supply output. Mr. Kingsnorth has predicted that before the expiration of China’s next five year plan in 2015 Chinese domestic demand will exceed its domestic production.”

I made the statement in the last sentence based on a chart that Mr. Kingsnorth presented at the 2008 SME Annual Meeting, and which was widely circulating at the time that I wrote my October 2009 article. A version of it is reproduced below:

One can see that this chart indicates that by 2012, the supply in China for rare earths is forecasted to be equalled by the demand for these materials, and given the trends of both factors, it would be reasonable to suggest that past 2012, demand would exceed supply. This is even more clearly illustrated in the following chart from the 2007 Roskill report on Rare Earths, authored by Mr. Kingsnorth:

Yet another variation of these two charts appears in the presentation made by Molycorp Mineral’s Mark Smith at the China Magnetics 2009 conference at the end of October 2009 – AFTER the publication of my original article –  again indicating that Chinese demand would meet Chinese supply by 2012.

One week after the original publication date of the aforementioned article, Mr. Kingsnorth presented an updated set of data and forecasts for the rare earths space at the Critical & Strategic Metals meeting in Washington DC, during October 20-22, 2009, for which I was the conference Chairman and Mr. Kingsnorth was a featured presenter by my invitation. He also distributed hard copies of a comprehensive document titled “An Overview of the Rare Earths Market”, published in October 2009, which also contained the updated chart, which is reproduced below.

From this chart, we can see that, based on updated information and data, Mr. Kingsnorth is now forecasting that China will be self-sufficent in rare earths at least until 2014, and probably beyond. It is my understanding that an additional version of the Overview document was published in November 2009, though I am not sure if the chart was updated in this document or not.

We fast forward now to December of last year. In response to requests to publish my original article to a wider audience, I reproduced the October 15, 2009 article as a posting at the Seeking Alpha web site, specifically on December 15, 2009. What I did not do, was include the publication date of the original article here at The Jack Lifton Report, and no doubt this is a contributing factor to the confusion on this matter. What I was also not aware of at the time, was that Mr. Kingsnorth had updated the earliest charts above, presumably at some point in 2008, and presented new data at the PDAC meeting in Toronto in March 2009, which I did not attend.  A version of that chart is reproduced below:

We can see then from this chart, and the chart above it, that from at least some point in 2008 onwards, Mr. Kingsnorth has actually been forecasting a surplus of rare earth supplies in China in future years.

Very shortly after publishing the article at Seeking Alpha, I was contacted by Mr. Kingsnorth, asking me to withdraw the comments detailed above, in the Seeking Alpha article, claiming that they were “totally incorrect, without foundation and misleading.”

Based on the lack of an original publication date on the Seeking Alpha article, it would be reasonable for Mr. Kingsnorth to have thought that I had originally written my comments after the publication of not one but two revisions of his chart, and that on the basis of these latest charts alone, comments that Chinese demand was about to exceed supply would indeed be inaccurate. However, given that Mr. Kingsnorth did publish charts in the recent past, still in wide circulation at the time of my original article, indicating that future Chinese demand would meet or exceed supply in the relatively near future, I would have to disagree that the comments were without foundation, albeit based on information from Mr. Kingsnorth that, at the time of the original publication of the article, had been superseded by more up to date forecasts. There was certainly no intent to mislead. I would also point out that the 2008 and 2009 charts have had very little circulation and were difficult to obtain even for the purposes of the present article.

I regret not being aware of the 2008 chart, presented at the PDAC meeting in March 2009, and I regret not including the original publication date of my article when reproducing it at the Seeking Alpha site, as it might have alleviated the subsequent confusion as to the origin of my commentary. Whenever I  re-post articles via various channels I usually do so within a relatively short time period; that was not the case for the article being discussed here. Going forward, I will look to include the original publication date on any such articles.

I of course take no issue with Mr. Kingsnorth or anyone else revising their forecasts on a periodic basis; such actions are of course natural and expected, in the face of new data that individuals obtain, I do the same thing myself and it is sensible to publish such updates as soon as is practicably possible.

As it happens though, and separate from the issue above, I respectfully disagree with Mr. Kingsnorth’s current projections on this matter. The latest annual production target figures from China, seem to me to show a significant reduction in the targeted annual output of antimony, tungsten, and the rare earths – three resources for which China is the world’s principal supplier – compared to Western estimates (e.g. by the USGS) of what those numbers were and should be. Issues of environmental management and productivity may now be intervening to cause me to re-assert my original belief that Chinese demand and Chinese supply could cross even earlier than thought, so that Mr. Kingsnorth’s original prediction may now have more validity than it did even when it was first made. Other commentaters and analysts would seem to share this viewpoint.  I am looking to further validate my own predictions by investigating the situation in China itself, on my planned trips to China later this year.

Anyway – I hope that the above information provides sufficient information to resolve the issues raised by my comments in December, and those by Mr. Kingsnorth last week.