"* China doesn't cut off supply, and many of these mines can't break even on their mine investments because prices don't go high enough." Even if China doesn't cut off supply the users outside China will not count on that because of the problems it would have if they did. Therefore they will look for supplies outside China.
"* Demand declines due to a global slowdown." Unlikely to happen. The use of rare earths will increase regardless of an slowing down.
"* There's rare earths all around the world, and if production ramps up quickly, prices could easily collapse, just like it has before." It is impossible to ramp up quickly. I doubt if production will catch up with demand in 5 years and maybe not for 10 years.
The real truth why rare earth stocks are surging is because the use is increasing and the production can not keep up with demand in the near future. Increasing the demand will be the need for the end users to buildup back up stocks on top of their usage, aggravated by China's dominance, tightening of export quotas and the strategic use of some products by defence security requirements.
LYC Price at posting:
$1.52 Sentiment: LT Buy Disclosure: Held
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