Why China will not embargo REE products. Why REE prices will...

Why China will not embargo REE products. Why REE prices will stay low for a while.

All of this is JMO. It is an opinion from wanting to be in this market and studying it for over a dozen years. I first bought MCP 14 years ago and have had large holdings, for me, in Lynas GWM and small holding in a few other. I currently want to be back into the REE stocks but now is not the time.

Let's look back a decade to last time China embargoed REE. Tens of billions was spent in free world removing or reducing REE. We all know how much the major car manufactures spent buying Tesla's non REE technology. Before embargo Ce sold for more than today. The embargo was killing WRGrace the biggest maker of Catalyst in the world. WRG came up with a catalyst that used one third the Ce and lasted 2 ~ 3 times longer. Ce still has not recovered its pre-embargo price. Seeing all that happened Chinna lowered prices to stop the massive amounts of capital flowing into REE sector. VC will not invest where they do not see a good chance of making money. Most miners / manufactures had to put their plans on hold a few went BK. The lower prices by China were a success.

After a few years China the dominate player with over 80% market share allowed prices to rise slowly. In late 2021 NdPr reached a ten year high of 1100 RMB WV. China was sword rattling and their share of market was growing. Many governments were scared of the REE situation. With high prices and good profits VC money started reentering the market. China knew that lower prices would stop VC money. With low prices governments may back off investments. It is unlikely all the governments in world will pump in even a fraction of what VCs can. Look how much cash NC raised while prices were high compared to the small amounts US and AU have put into Lynas today. These Gov funds come with many restrictions. So seeing this new money flowing in, China allowed all REEs to drop NdPrO went from 1100 to 482 RMB WV today The VC is backing out as fast as commitments allow them to. Again, JMO but China wants to slow entry by others in this market it will take months at these prices to do this. Any embargo would be very destructive long term to China's market share. As well as the size of market as alternatives to REE are put in place.

Both Lynas in their Q3 CC and MCP in their Q1 and Q2 CC mentioned that China is now very close to their breakeven point. I believe this is true. At the breakeven point there is a wide band where you do not make money, EBIT will be positive. You are paying employees and keeping the lights on. China has raised Quotas significantly in last two years. Manufacturers have not produced much of this rise. It is a clear case of letting companies in China manage their own business while keeping prices low.

Could all this reverse in just a few weeks? Most certainly could. My money says it will not. because I understand ( I think) what is causing low prices and do lots of tracking of prices including Lithium and other elements I hope to see this early and compensate accordingly.

What you believe is important when investing. Far more important is understanding why you believe it and detecting things that may prove you wrong.