The narrative is there for rare earths - on a company level we...

The narrative is there for rare earths - on a company level we are sitting on a well needed resource, yet politics and 'economics' are at play. I don't normally post much although have found myself a bit of spare time lately.

China issued a third batch of quotas for REE; from business times:

"CHINA has set its third batch of quotas this year for rare earth mining output at 15,000 metric tonnes, the Industry and Information Technology Ministry said on Friday (Dec 15)... “This is really out of our expectation as such kind of quota is typically issued twice a year,” said a Chinese analyst, requiring anonymity as he is not authorised to speak to media. “And the addition in quota might be because volumes issued in the first two batches could not meet demand needs"...The new allowances take the 2023 total rare earth mining quota to 255,000 tonnes, and the total smelting and separation quota to 243,850 tonnes, up 21.4 per cent and 20.7 per cent respectively from a year before, versus year-on-year rises of 25 per cent and 24.7 per cent in 2022.China has also become a major importer of rare earths, with imports in November surging 125 per cent on the year to 14,315 tonnes, and imported volumes from January to November totalling 159,472 tonnes, up 44.7 per cent on the year. REUTERS"

Demand needs within China is increasing - prices falling, recall that earlier in 2023 the Chinese Govt issued a notice to rare earth companies to bring prices to a more "reasonable" level.

Chinese companies within the space is still active and strong:

"Last month, a Chinese firm acquired the entire stockpile at Canada’s first and only operating rare earth mine. Shenghe Resources also bought a 9.9 per cent stake in Vital Metals, the Australian company that owns the project...And with an undersupply at home, China’s rare earth industry has had to rely more on imports of upstream products to process.Imports have grown significantly – from 14,274 tonnes overall in 2016 to about 10 times that volume in 2022.The industry imported 2,759 tonnes of rare earth oxides, an upstream product, in 2016 – and 10 times more in the first half of 2023.It also went from importing just 2 tonnes of raw ores in 2016 to imports of more than 70,000 tonnes annually in the last three years. “Chinese companies are importing raw materials from abroad and actively seeking to diversify to meet their need for raw materials, with Shenghe Resources being a notable pioneer in this regard,” Duan said.
...
In recent years, Shenghe has acquired stakes in two Australian companies that own rare earth mines in Greenland and Tanzania, as well as a stake in the owner of the largest such mine in the US. That mine, named Mountain Pass, produces about 15 per cent of the world’s rare earths, according to its website.These deals have given Shenghe exclusive rights to buy rare earth concentrates produced at the mines.From 2017 to 2022, the company, which is partially state-owned, has spent about US$248 billion annually on rare earths from foreign mines – far more than its purchases of domestic rare earths.In the December deal, the Chinese company acquired the Canadian mine’s stockpile and it will also work with Vital Metals to develop another mine in Tanzania."

Note the company is partially state owned but are making moves in the space - yet prices are crawling. We'll have to wait for broader market sentiment to return, although looking at what the Chinese are doing vs. what the "market" which they "control" is saying speaks volumes. The Chinese generally move with a longer term vision plan, whereas western countries are very near term focused, as you can see here, if there is no -immediate gain- it is punished. It is difficult to say when the reigns will come off, or when a catalyst will come regarding prices. I understand Chinese are trying to obtain more raw material for refinement and end product sales - although keep in mind they have a lot of raw material at home, with prices so low - from a market they control, yet have increased their imports. Quite telling?

Unfortunately the resource we dabble in is heavily politicized, and we are falling prey to these games - it's no secret re: government sentiment on such materials. Fortunately for us, DRE isn't a one trick pony. Hope this brings some solace to those in the red.

Articles:
1. https://www.businesstimes.com.sg/international/china-issues-third-batch-rare-earth-quotas-2023
2. https://www.scmp.com/news/china/science/article/3249249/china-moving-rare-earth-value-chain-west-trying-catch