Investing in rare earth metals – will prices rise?

[investor]

what do you think? the chinese have been turning the screw recently choking off the supply to other countries. the shortage has made investors sit up and take notice. do you think rare earths are a good investment for the medium term or long term?

[thor3436]

probably uranium prices went through the roof lately

[whitfield]

Originally Posted by investor

what do you think? the chinese have been turning the screw recently choking off the supply to other countries. the shortage has made investors sit up and take notice. do you think rare earths are a good investment for the medium term or long term?

I'd avoid investing in rare earths in general, they're not really rare, although there certainly might be arguments for investing in one or more specifically. You're right about the Chinese. They used cheap labor to undercut prices and drive mines in other countries out of business. The US military needs devices made with rare earths and mines will be opening again in North America and Australia to ensure a Western supply of these metals.

[whitfield]

More info

A Canadian company hoping to compete with China's near-monopoly of rare earth elements — metals critical for everything from U.S. military weaponry to wind turbines — wants to open a strip mine inside a national forest in northeast Wyoming.

...with China slashing exports of rare earths and Washington concerned the U.S. military could face a shortage of materials for lasers, smart bombs, guided missiles, night-vision goggles and jet engines, Don Ranta is optimistic about his Black Hills National Forest mine proposal.

Global rare earths prices have soared in recent months, in some cases up to six-fold. In January, President Barack Obama signed a defense spending authorization ordering Defense Secretary Robert Gates to ensure U.S. access to rare earths.

Mountain Pass is the only U.S. mine producing rare earths. Mining there ceased because of heavy Chinese competition in 2002 and only resumed in December amid the much-improved market outlook.

Rare earths aren't scarce. But few places exist with enough concentrations to mine profitably, and they are difficult to isolate in a purified form.

Cheap labor and low environmental standards enabled China to dominate the rare earths market starting in the 1990s, and the country currently supplies 97 percent of the world rare earths market.

But even as demand soars for rare earths, China is cracking down on rare earths smuggling and cutting legal exports. Together, that will reduce the global rare earths market by 25 percent.

http://news.yahoo.com/s/ap/20110220/...re_earths_rush