The United States has been looking into the possibility of a strategic reserve for rare earth metals.
Ever since China’s largest rare earth company, Inner Mongolia Baotou Steel Rare-Earth (SHA: 600111), postponed production, and since China put even stricter quotas on exports, there has been global concern about the future of rare earths.
Though China doesn’t actually contain more than 30% of the world’s rare earths, it produces close to 95%.
But all that is changing as the nation expresses concerns over pollution and illegal trading. To crack down, China is cutting everyone off.
But as the Financial Times reports, this is especially causing problems for the U.S. Department of Defense, which uses rare earth metals in much of its equipment.
So discussion of stockpiling resources has begun.
Donald Ranta of Rare Element Resources (AMEX: REE) told the Financial Times that it might be wisest to wait for companies outside of China to begin more heavily producing rare earths.
Some companies expected to increase production are Molycorp (NYSE: MCP) and Lynas (ASX: LYC), as well as some of the companies we reported on last month.
But regardless of when the reserve is created, it is more and more likely that it will, in fact, be created.
Representative Mike Coffman told the Financial Times that China is an “unreliable trading partner” and that a reserve would create more stability and control over the resource.
Ranta believes, as the article reported, that a reserve would increase demand for the resource.
Congress is set to receive a report from the Defense Logistics Agency on the issue on December 31, said the Financial Times.
If this does come to fruition, it may be several years before the project is complete. But China’s restrictions probably won’t loosen up anytime soon, and non-Chinese production is necessary.
That’s all for now,