Setting The Record Straight

by Jack Lifton on March 20, 2010 · 10 comments

in Miscellaneous, Rare Earths

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Earlier this week a conference was held in Washington D.C. on Technology and Rare Earth Metals, which I was unable to attend due to other commitments. I was, however, contacted during the meeting by a number of people asking for clarification on some comments made by Dudley Kingsnorth, the Australian rare earths specialist. Mr. Kingsnorth apparently took issue, while on the stage, with comments that I made in December 2009, in which I said that he had predicted that China would not be able to meet its internal demands for rare earths in the near future. I would like to take this opportunity to set the record straight on this matter, and to hopefully put this minor controversy to rest.

Readers of The Jack Lifton Report who have been with me since launching the site in the fall of 2009, will recall that I published an article on October 15, 2009, available for download to subscribers only, called “The Rare Earth Crisis of 2009”. In this article, on the subject of the alleged existence of a report in China on restricting exports of rare earths, I said the following:

“The problem that has been exposed by the “discovery” of the memorandum on rare earth export allocations is that it proves the conjecture highlighted by well-known Australian rare earth specialist, Dudley Kingsnorth, that Chinese domestic demand for rare earths is rapidly catching up to Chinese supply output. Mr. Kingsnorth has predicted that before the expiration of China’s next five year plan in 2015 Chinese domestic demand will exceed its domestic production.”

I made the statement in the last sentence based on a chart that Mr. Kingsnorth presented at the 2008 SME Annual Meeting, and which was widely circulating at the time that I wrote my October 2009 article. A version of it is reproduced below:

One can see that this chart indicates that by 2012, the supply in China for rare earths is forecasted to be equalled by the demand for these materials, and given the trends of both factors, it would be reasonable to suggest that past 2012, demand would exceed supply. This is even more clearly illustrated in the following chart from the 2007 Roskill report on Rare Earths, authored by Mr. Kingsnorth:

Yet another variation of these two charts appears in the presentation made by Molycorp Mineral’s Mark Smith at the China Magnetics 2009 conference at the end of October 2009 – AFTER the publication of my original article –  again indicating that Chinese demand would meet Chinese supply by 2012.

One week after the original publication date of the aforementioned article, Mr. Kingsnorth presented an updated set of data and forecasts for the rare earths space at the Critical & Strategic Metals meeting in Washington DC, during October 20-22, 2009, for which I was the conference Chairman and Mr. Kingsnorth was a featured presenter by my invitation. He also distributed hard copies of a comprehensive document titled “An Overview of the Rare Earths Market”, published in October 2009, which also contained the updated chart, which is reproduced below.

From this chart, we can see that, based on updated information and data, Mr. Kingsnorth is now forecasting that China will be self-sufficent in rare earths at least until 2014, and probably beyond. It is my understanding that an additional version of the Overview document was published in November 2009, though I am not sure if the chart was updated in this document or not.

We fast forward now to December of last year. In response to requests to publish my original article to a wider audience, I reproduced the October 15, 2009 article as a posting at the Seeking Alpha web site, specifically on December 15, 2009. What I did not do, was include the publication date of the original article here at The Jack Lifton Report, and no doubt this is a contributing factor to the confusion on this matter. What I was also not aware of at the time, was that Mr. Kingsnorth had updated the earliest charts above, presumably at some point in 2008, and presented new data at the PDAC meeting in Toronto in March 2009, which I did not attend.  A version of that chart is reproduced below:

We can see then from this chart, and the chart above it, that from at least some point in 2008 onwards, Mr. Kingsnorth has actually been forecasting a surplus of rare earth supplies in China in future years.

Very shortly after publishing the article at Seeking Alpha, I was contacted by Mr. Kingsnorth, asking me to withdraw the comments detailed above, in the Seeking Alpha article, claiming that they were “totally incorrect, without foundation and misleading.”

Based on the lack of an original publication date on the Seeking Alpha article, it would be reasonable for Mr. Kingsnorth to have thought that I had originally written my comments after the publication of not one but two revisions of his chart, and that on the basis of these latest charts alone, comments that Chinese demand was about to exceed supply would indeed be inaccurate. However, given that Mr. Kingsnorth did publish charts in the recent past, still in wide circulation at the time of my original article, indicating that future Chinese demand would meet or exceed supply in the relatively near future, I would have to disagree that the comments were without foundation, albeit based on information from Mr. Kingsnorth that, at the time of the original publication of the article, had been superseded by more up to date forecasts. There was certainly no intent to mislead. I would also point out that the 2008 and 2009 charts have had very little circulation and were difficult to obtain even for the purposes of the present article.

I regret not being aware of the 2008 chart, presented at the PDAC meeting in March 2009, and I regret not including the original publication date of my article when reproducing it at the Seeking Alpha site, as it might have alleviated the subsequent confusion as to the origin of my commentary. Whenever I  re-post articles via various channels I usually do so within a relatively short time period; that was not the case for the article being discussed here. Going forward, I will look to include the original publication date on any such articles.

I of course take no issue with Mr. Kingsnorth or anyone else revising their forecasts on a periodic basis; such actions are of course natural and expected, in the face of new data that individuals obtain, I do the same thing myself and it is sensible to publish such updates as soon as is practicably possible.

As it happens though, and separate from the issue above, I respectfully disagree with Mr. Kingsnorth’s current projections on this matter. The latest annual production target figures from China, seem to me to show a significant reduction in the targeted annual output of antimony, tungsten, and the rare earths – three resources for which China is the world’s principal supplier – compared to Western estimates (e.g. by the USGS) of what those numbers were and should be. Issues of environmental management and productivity may now be intervening to cause me to re-assert my original belief that Chinese demand and Chinese supply could cross even earlier than thought, so that Mr. Kingsnorth’s original prediction may now have more validity than it did even when it was first made. Other commentaters and analysts would seem to share this viewpoint.  I am looking to further validate my own predictions by investigating the situation in China itself, on my planned trips to China later this year.

Anyway – I hope that the above information provides sufficient information to resolve the issues raised by my comments in December, and those by Mr. Kingsnorth last week.

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1 John Petersen March 20, 2010 at 5:54 pm

All of us in the blogosphere have encountered similar problems of relying on the best information we could find only to hear after the fact that more recent data was different. In those cases the best we can do is take reasonable steps to correct the oversight; but we can’t even do that until the person who is complaining about the error provides the more current information. Something tells me the request you got was not phrased in terms of “it looks like you were using my old data, so let me send you the most recent data that leads to another conclusion.”

I personally think there’s a good deal more mea-culpa in this correction than is warranted.

2 Stan Bruns March 20, 2010 at 6:50 pm

Thanks for the update, as always. Speaking solely for myself and as an interested observer and investor, I find it very difficult to believe the pronouncements of governments concerning statistics, particularly those cases where the numbers affect cherished national agendas.

3 William Traster March 20, 2010 at 6:52 pm

So we have a situation here where (hard to obtain) charts are updated to show that China has plenty of supply of REEs, then we learn that the updated charts are likely flawed, to where the original charts may be closer to being correct, until the next round of charts come out, that may have China supply of REEs less than the original chart.

No wonder there is confusion!

(Please don’t ask me to rewrite the above, because I’m not really sure I could.)

4 Andrew March 20, 2010 at 7:28 pm

I wonder why we are even talking about REE as a whole and not the individual elements, ie. dysprosium, terbium, etc?

5 geoff alford March 21, 2010 at 3:19 am

I have to confess to a professional relationship with Jack Lifton in case of perceived bias.

In my view, it is all very well looking at demand-supply trend charts for technology metals, but one should also consider changes in other fundamentals.

Composite or technology materials are changing thinking about engineering materials and revolutionizing engineering applications. Composites have a high strength to weight ratio. So you might NOT need X kilos of an REE to power a hybrid car or wind turbine, if its composite percentage is increased in the car body or wind structure..

This may affect future forecasts of demand per manufactured unit, except there may be many more cars and wind turbines in China and India.

Recycling will definitely have to be in the equation in these cases. Which reminds me that the Australian government still has no recycling policy for analogue TVs, despite analogue turn-off to occur within 3 years! One only hopes that counties treasure REEs more.

Like the stock market, trend charts can be useful, so long as fundamentals don’t change!

6 geoff alford March 21, 2010 at 3:42 am

I could not resist an example of REEs and composites together

JX-03 Rare Earth Compound Stabilizer

JX-03 is Rare earth compound stabilizer contains lubricant, which is applicable for non-conventional PVC materials. The product has excellent performance of inside and outside lubricating balance, processing and low separation. The product contains compound antioxygen and proper rare earth, which have obvious effect on increasing weather fastness of non-conventional PVC and the strength of fillet weld.

7 Volkhart March 21, 2010 at 9:07 am

Hi Jack,

do You think it’s possible to switch from TREE- to single REE-forecasts regarding demand/supply-matters? How would You pledge thinking of Neodymium and/or Gadolinium for instance?
Did You and others consider the application of special alloys(including REE) with giant magnetic caloric effect for all kinds of cooling/heating matters (i.e. electric vehicles with a “cold” power train!)?

Your answer is very much appreciated
Volkhart

8 Dennis Carlton Rossi March 21, 2010 at 3:46 pm

Dear Mr.Lifton:

I call on the Canadian government to establish a strategic reserve of precious metals comprised of the PGM’s and HREE’s. One-half of the reserve would be PGM’s and the other half would include HREE’s.

If these commodities are purchased from Canadian companies operating in Canada then it would create tens of thousands of jobs. It would also protect Canada’s future in the manufacturing industry in the areas of green technology, information technology and defence technology which are dependent on these commodities.

Also, I call on the government to toughen legislation on the takeover of Canadian firms who have interests in REE and HREE. No foreign firm should be allowed a majority interest in any of these companies. This is in the national interests of Canada.

Yours,

Dennis Carlton Rossi

9 Bob M March 22, 2010 at 11:10 am

Kingsnorth has charts with well over 100,000 supply from China for 2010, but Bloomberg has an article which puts the 2010 production in China of rare earths as officially capped at 89,200.
http://www.bloomberg.com/apps/news?pid=20601089&sid=aMbYZBSp.0og

Here is a translation of the Chinese press release: ” Rare-earth ore (rare earth oxides REO) extraction quota of total control of 89.2 thousand tons, of which 77,000 tons of light rare earth, the heavy rare-earth 12.2 thousand tons.”

Anyone have any ideas about the discrepancy?

10 Volkhart March 24, 2010 at 2:17 pm

Bob M March 22, 2010 at 11:10 am
Kingsnorth has charts with well over 100,000 supply from China for 2010, but Bloomberg has an article which puts the 2010 production in China of rare earths as officially capped at 89,200.
http://www.bloomberg.com/apps/news?pid=20601089&sid=aMbYZBSp.0og

Here is a translation of the Chinese press release: ” Rare-earth ore (rare earth oxides REO) extraction quota of total control of 89.2 thousand tons, of which 77,000 tons of light rare earth, the heavy rare-earth 12.2 thousand tons.”

Anyone have any ideas about the discrepancy?

One of my Australian friends within the REE-business answered Your question:

D Kingsnotrh is supposed to include the illegal production numbers which the government might deny to do.

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