Comments on: The Green Revolution In China

By: Chris

Chris — Mon, 29 Nov 2010 22:29:16 +0000

Less than 1% of wind turbines currently installed use permanent magnets. Why on earth would you bother hypothesizing that all of China’s new wind generation will come with turbines of that sort?

By: Nicholas Matwiyoff

Nicholas Matwiyoff — Thu, 26 Aug 2010 23:30:01 +0000

Jack: I’ve enjoyed your contributions to the broad and rapidly changing world of rare earth investments. Some of your contrarian views are especially useful in the construction of sturdier and more profitable investment models. It is in that spirit that I offer my comments on your recent contribution. “The Green Revolution in China”. It seems to me that China’s recent actions regarding restrictions of rare earth exports and its moves to “manage” rare earth prices derive directly from enormous emerging problems in its economy and health systems. Rare earth supply and demand issues were, and are, secondary. Important, but nonetheless secondary.
The central economic issue owes to major fundamental changes that occur in countries as they progress from so-called emerging markets to developed markets. An important manifestation of these changes is a major jump in the demands for electricity and oil. For example, emerging market countries like China and Indonesia use approximately 0.004-0.005 barrels of oil per person-day, whereas developed market countries like the US, Germany, France and South Korea use about 0.04 to 0.07. In a small country like South Korea (population ~ 51,000,000) this transition caused oil use to change from 250,000 bbl/d to ~2.2 million bbl/d. For a country like China (population ~ 1.4 billion) this would require a change from ~ 7.7 Million bbl/d to nearly 70 Million/d. This is nearly equal to the daily consumption by all the people of the world in 2006! This is a physically and fiscally impossible problem to solve – the world does not have the proved reserves to develop, there is not time to develop them even if we did have them (China has started the transition already), and where would the money come from? I made these calculations back in 2007 (using data from 2006 and 2005) when I first became interested in electrical grids and windmills and battery“buffers” (electrical cars). So there may be some minor data inaccuracies, but the major point still stands – if the Chinese do not solve their electricity and oil problems, they will have an unhappy, unruly population.
However, the Chinese (superb planners that they are) have known their constraints on oil and electricity (coal) for some time now. Hence their parallel accelerated development of nuclear power, wind power, electrical grids and necessary electrical grid buffers (non-polluting Ecars – two birds with one stone, like the Danes). I would suggest that the Chinese have long been worried about the LREE’s in this context as well – unlike the HREE’s, the markets for La, Nd, Pr, and lately CE, have been very high volume and now are pushing at the margins of supply. (I would suspect that, despite their protestations, the Chinese have an adequate inventory of HREE’s – their “warehousing has been going on for a long time now). They did after all go after Lynas first. Lynas could provide Nd (magnets, there is a shortage now and it will go to 50,000 tonnes in a few years) and Pr (magnets) and La (batteries). In this context, even the counter-intuitive pricing scheme they “allowed” makes sense – raise the prices of Nd, La and Pr and cut external demand for them.
So, in the light of evidence, extrapolations and assumptions that are no more speculative than those for the HREE model, we have the basis for an LREE business model as a development spur for the rare earths over the next 5-10 years. Could make plenty of money for Lynas, Moly,RES, Alkane and Arafura.
I had the devil of a time getting what I have written onto this form — deletions, editions. Please excuse the jerkiness in spots.

Sincerely, Nick Matwiyoff

By: loquacite

loquacite — Thu, 26 Aug 2010 17:50:19 +0000

Uuuh… Aat. I hate to burst your bubble, but those companies buy their way into the USMMA, with huge membership dues. No agency in Washington appoints them.

In fact, this is a lobby group, so these huge dues go towards doing battle with politicians, if nothing else, in order to get pro-REE legislation enacted.

By: Gareth Hatch

Gareth Hatch — Wed, 25 Aug 2010 03:05:22 +0000

Aat Oskam: a small FYI – the USMMA is the United States Magnet Materials Association.

By: Aat Oskam

Aat Oskam — Tue, 24 Aug 2010 19:22:50 +0000

Jack, again a rasersharp analysis!
Washington may be numb, but the US Magnets Manufacturing Agency is not: (http://www.businesswire.com/news/home/20100813005419/en/USMMA-Expansion-Comprehensive-Alternative-Chinese-Rare-Earth)
they made Lynas and Great Western and Arnold Magnetic Technologies a member. So politicians are overtaken by the people who really understand the REE world, also thanks to your fine articles!

Greetings from Holland, Aat Oskam

By: Hugo Persijn

Hugo Persijn — Tue, 24 Aug 2010 03:03:56 +0000

Dear Jack .
Where would
http://www.alkane.com.au/reports/broker-media/brokers/20100723.pdf
end up eventually in the long run with their Rare Earths (not the gold) ?
Kind Regards ,
Hugo
Kind Regards from Luxembourg

By: Tek

Tek — Mon, 23 Aug 2010 23:58:50 +0000

This reiterates a comment made by a Chinese official over 5 years ago, discussing Exxon (I think it was) and its grand plan to help China develop its burgeoning demand for automobiles. The official stated clearly in the article that China had no intent to try to build a massive pipeline,refinery, and trucking infrastructure for the transport and distribution of imported petroleum products. They would build millions of electric cars and charge them with local and regional wind powered charging stations.
It appears clearer and clearer that when the Chinese say they’re going to do something on a five or ten year plan, it gets done. We could use a good dose of that kind of responsibility from our corporate industrial/political system.