Home' Australian Resources and Investment : September 2014 Contents VOLUME 8 NUMBER 3 • Australian Resources and Investment • 43
industries and boutique businesses. For our target for
the Dubbo Zirconium Project, you can see the types of
materials we're looking at: zirconium chemicals and
zirconia. We're certainly not going into the zirconium metal
market, and we're keeping away from the low-value bottom
end of that business.
Rare earths industry
The rare earths industry is amazingly diverse. It's gone through
that enormous peak that I referred to before. We've settled
down again into a stabilised, long-term, sustainable state, and
the prices we're seeing today are probably a re ection of the
bottom of the market as far as rare earths prices go.
If you look at the pie chart (slide 6), the light blue colour on
the bottom left-hand side represents rare earths magnets --
they sound like an innocuous thing, but they're a very big part
of the rare earths industry. And the very large growth that's
coming out of the rare earths industry is really going to be
driven by the rare earth magnet industry.
Again, it's a $3-billion-per-year business; not huge, but
growing at reasonable rates. China's a big player in this
industry; about 90 per cent of the world's rare earths come
out of China. The one thing from a marketing perspective
is that the business is imbalanced. What I mean by that
is that there are seven or eight commercial rare earths
that are used regularly in industry. Right now, two are in
oversupply -- things like lanthanum and cerium, which are
your bulk tonnage light rare earths -- and they're going to be
in oversupply going forward. This is a problem, because most
of the world's new rare earths projects coming onstream are
light rare earths projects. In other words, they are going to
be dominantly lanthanum and cerium producers. The other
critical rare earths used in the magnet industry -- neodymium,
dysprosium and terbium -- will be in undersupply, so you
can see what I mean by imbalanced. There's a complex
interchange between production and what's available.
Speaking of niobium, the vanadium industry is very, very
similar. Most niobium goes into ferro-niobium, which goes
into the steel industry and into alloys. It has the same general
characteristics; it strengthens the steel, giving it a greater
tensile strength, but lightens it at the same time. You drop
the weight of the steel by using niobium as the main additive.
One of the interesting things, is to do with the auto industry
$9 worth of niobium in the chassis of a standard family car
drops its weight by about 10 per cent, and the emissions
minimisation and fuel ef ciencies that brings with it.
Chinese export taxes and controls
There's a lot of debate, discussion, and misinformation in the
marketplace and in the media about the rare earths industry,
and particularly about China's position in that market. About
a month ago, the World Trade Organization (WTO) came out
and ruled against China's export quotas. I won't go into great
detail about the export quotas, but basically, the WTO said
these were unsustainable for world industry. The Chinese
haven't come out and said it speci cally, but a lot of the
feedback we're getting out of China is telling us that, while
they will probably tell the WTO that they're not interested in
their ruling, they'll go about it in a much subtler way than
perhaps I would, and say that China is intent on using those
rare earths internally. It wants to make the end products --
magnets, the phosphors for your TV and your energy-ef cient
lighting, and all those sorts of things -- so it will continue to
consume its own rare earths and it will go from 65 per cent
today to 80 per cent by 2020 consumption of rare earths
internally in China.
Therefore, they really don't need to worry about export
quotas; they'll be consuming most of the material themselves.
The WTO said they had to drop the export price, or the tax.
Our view is that if they do that, they will put a new resource
tax on the rare earth material. What will happen is that
the material of rare earths being exported out of China will
probably go up in price, so it's a great result.
The other thing is that the Chinese are intent on tidying
up the rare earths industry. Ten or 15 years ago, when I rst
got into this business, there were something like 100 rare
earths producers in China. Now, there are 80, and they have
a production capacity of about 200,000 tonnes per annum,
which is roughly 50 to 80 per cent greater than current
world demand. The Chinese have recognised this, and what
they've said is, 'We will consolidate that industry.' Their plans
are to have six state-owned enterprises running the whole
rare earths industry. So, you can see that from an outside
perspective, nothing is going to change -- we must accept that
it's actually going to get a bit tighter. They're telling me that
certain plants are shutting down. We've been told that about
100,000 tonnes of plant capacity will be shut by the end of
2014 -- that's very substantial.
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