Prices of Rare Earths to Fall Further in 2012: Analyst

Prices of rare earth elements, precious metals essential to a number of manufacturing new technologies, will continue to fall further in 2012, an analyst had said.

"I believe economic fundamentals are weakening around the world and the resulting credit crunch will hurt trade, finance and manufacturing. Demand for rare earth elements is derived from demand for finished goods. Therefore, it's very much dependent on the overall health of the manufacturing sector. I expect prices for rare earth elements to fall further in 2012," Anthony Alfidi of Alfidi Capital investment said in the www.theaureport.com.

The rare earths sector had a run-up until this summer, primarily on Chinese export restrictions and the enthusiasm that some speculators had for the sector, Aldifi said. "But those conditions are both absent now."

Prices will also get affected by technology innovations or substitutions that consumers of rare earth elements had to make to sustain their manufacturing plans.

"Those factors will put a long-term price ceiling on the rare earth elements. Only the lowest-cost producers are going to survive," Alfidi said.

"In the long-term, REE substitutes will eventually become available, thanks to some long-overdue research and current development underway."

The analyst also foresee China will no more likely set more export quotas on its rare earths sector since the world's second-largest economy also needs to keep its exports up. China's growth largely depends on the performance and volume of its exports shipments.