Australia to likely get RE Price Floor

[John]

https://www.theaustralian.com.au/su...OUPA-Segment-1-NOSCORE&V21spcbehaviour=append


So this is behind a paywall. But it bascially says that the Aust Govt is 'actively considering a rare earth price floor for Australia'.

So add this to the govt support.

Already they are:
- Small grants
- Debt
- Debt guarentees
- Completion facilities (ie cost overrun)
- Equity
- Off take (for their stockpile)

And now the price floor.

Next we will have Ministers sweeping the lunch shed floors.

This is great news to allow the RE sector in Australia to get going, whilst China uses all its might to suppress the global sector.

Now for ARU - This means that Management should now be able to compete the negoitiations (ie they can agree the off taker parties price..and the Aust govt will pay the difference up to (presumably) US$110 (or about $150 in aussie).

Now the race is on. Will it be the equity strategy or the JV....who will get the deal done first.

 

[Fundamental]

As much as I welcome a price floor, I can see some potential negative outcomes. There is certainly no doubt that the Chinese SMM price has been controlled for decades. Setting a Western government sponsored floor is going to have a similar effect albeit at a higher price. IMO that price is still too low compared to the contribution that RE makes to the values of the end products they are contained in. ie a typical EV has just 1-2kg of RE in its Magnets ~ so a US$60k car made possible by US$2-300 worth of NdPr, we could triple the price and it would still be an insignificant marginal cost. A free market, driven by Supply / Demand economics is the only fair way to set prices.

 

[John]

Well this is just a floor. The market can (and probably will) take it higher. But what it does do, is get the ex-China projects (like ARU) that are currently stuck....into construction.

Also there is no reason, why the Govt can't lift the floor. But I guess it will be sized just so the the ex-China projects into production...and then the market will (hopefully) take off.

How will China respond? That is an interesting question! Push prices up (make some money from ex-China? and keep prices in China cheap?) Or just restrict supply...

China will have game played this out...and will be many steps ahead of the RoW.

 

[WideMouthFrog]

As much as I welcome a price floor, I can see some potential negative outcomes. There is certainly no doubt that the Chinese SMM price has been controlled for decades. Setting a Western government sponsored floor is going to have a similar effect albeit at a higher price. IMO that price is still too low compared to the contribution that RE makes to the values of the end products they are contained in. ie a typical EV has just 1-2kg of RE in its Magnets ~ so a US$60k car made possible by US$2-300 worth of NdPr, we could triple the price and it would still be an insignificant marginal cost. A free market, driven by Supply / Demand economics is the only fair way to set prices.

It’s really to ensure national security. They have no choice. Become China’s toy, or get on board and get a Rare Earth sector into action.

If it wasn’t a monopoly at the hands of China, then your points raised above sit well. But when you have a huge 20 year disadvantage that the Chinese government has played to its processors. Then you have move and move fast.

It’s no longer a choice but a necessity.