lyc sp and the price of rees, page-27

this part of NC's speach addresses some issues around supply/demand/pricing etc...

"Rare Earths are critical raw materials in the technologies that will underpin the Asian Century. The community will increasingly demand clean, energy efficient applications - from cars through to electronic goods - to sustain the burgeoning and increasingly affluent population of the 21' century. Rare Earths have a vital and non substitutable role to play here.

But to ensure that Rare Earths are used as they should, we need to give absolute confidence in the supply chain to the large Original Equipment Manufacturers that use them. The volatile market pricing of the past eighteen months was exciting, but not truly healthy for our industry. Fear of inventory shortage meant that material was stockpiled at too high a level for subsequent demand. and companies moved their businesses to China due to fear of inadequate access to Rare Earths. In Hong Kong last week I started my presentation to the Rare Earths conference with the expression "Welcome to the Hangover".

Prices have fallen to levels we now believe are truly sustainable. Some demand destruction has occurred but we do not believe it is permanent. The upward growth in Rare Earths demand, well above GDP. will resume. It is difficult to forecast when as global macro-economic factors are so volatile, but we hope the second half of 2013 sees a marked increase in demand in all Rare Earths. Over the past 12 months, Rare Earths prices have returned to a range that is supportive of strong demand growth in key applications. These prices still ensure we are able to make a satisfactory return on our investment.

Our ability to service our customers with reliability and over a long period is predicated on solid access to material in the ground. We can do this. "


so, from the speech we can gather that demand destruction IS REAL. there is less demand today for REE's than there was some time ago, despite the influx of smartphones and gadgets to the market. manufacturers are getting by without the need for REE's.

we can then reason that:
demand destruction is contributing to weaker REE prices.

we can also reason that weaker prices will increase demand. and that increases in supply (from lynas and others) will be a negative for prices.

basically demand will have to grow quicker than supply for the price to rise... simple economics really, the forum cheersquad never really wants to touch it...