What the Rare Earth fiasco teaches us

Sir, Your obituary on the death of U.S. Rare Earth miner, Molycorp, (June 25th 2015, Boom in once ‘rare earth’ metals ends in miner’s bust), betrays a lack of understanding about this company’s gestation and subsequent flotation in 2010.

There never was a shortage of Rare Earths, nor was China trying to corner the market. The origins of the so-called ‘Rare Earth boom’ may be tracked to a single infamous phrase from a 2007 report by the US National Academy of Sciences entitled ‘Minerals, Critical Minerals, and the U.S. Economy’, which cited the USA’s dependence on China for 97.6% of its Rare Earths.

Following this authoritative scientific report which had strayed into the area of economics, like an Afghan child into a minefield, the price of Neodymium, to take a single example, rose from $20 per kg where it was languishing in 2008 to reach $550 per kg by 2010/11. Ordinary foot soldiers in the metals trade, such as myself, were hauled from our desks as witnesses before the UK Parliamentary SciTech Select Committee, who pondered whether to recommend spending UK taxpayers’ funds to stockpile metals that, at best, some members had difficulty pronouncing – Neodymium Yttrium, Ytterbium, Thulium, Erbium, Gadolinium etc (you get the picture).

In fact, China never failed to deliver a single kilo of rare earths to customers. Unlike African states, who tend to allow metals and minerals to be removed from under their feet by foreign miners, often domiciled in low tax regions, China has greater ambition – such as using rare earths to develop and sell the green technologies which depend on them.

The assertion in your report today, that the collapse of Molycorp may be attributed to ‘the Chinese government’s failed efforts to corner the market’, is therefore misleading and lessons that need to be learnt could be missed.

All nations have surpluses and deficits in one mineral or another. We resolve these differences via trade. It is what people like me do for a living. The only mercy in this whole sorry saga, in which investors have lost millions, is that, luckily, in the case of the UK, inactivity was the best course of action.

What the Rare Earth fiasco teaches us is the limits of policy enacted on the basis of paranoia and xenophobia.

Kind regards,

Anthony Lipmann

Chairman, Minor Metals Trade Association (MMTA), 2003-06

(Published in Financial Times 08/07/2015)