Leaders of two of the world's most secretive countries─China and North Korea─met Wednesday, leaving people in other countries wondering anew how their unusual, unconfirmed-but-visible summit will affect the security and economy of East Asia.
North Korean dictator Kim Jong Il increased the frequency of his visits to China over the past year. The latest trip, which began Friday, is the third in the past 12 months, preceded by just four trips since he took power in 1994.
So far, the visits to China's relatively more open society have not yet led Mr. Kim to change the North's pursuit of nuclear weapons, its isolationist, state-controlled economy or its withholding of basic rights and freedoms from its 24 million citizens.
But the trips remain an intense source of curiosity in neighboring South Korea and elsewhere. Mr. Kim is perceived by outside analysts to be under enormous pressure to secure Chinese economic aid as well as Beijing's political support for his son to succeed him upon his death. Mr. Kim is 70 years old and his health deteriorated after a stroke-like illness in 2008.
Mr. Kim arrived in Beijing Wednesday morning and met with Chinese leaders in the evening, according to foreign news accounts that tracked his motorcade to the Great Hall of the People, China's main government building. However, accounts varied on whether he met Chinese President Hu Jintao or Premier Wen Jiabao.
As in the past, neither officials nor the state media from the two countries confirmed Mr. Kim's meeting with Chinese leaders.
Usually, the two countries don't discuss Mr. Kim's visits until he returns to North Korea. However, Mr. Wen earlier this week told South Korean President Lee Myung-bak that Mr. Kim was in China to learn about economic development. Mr. Lee has repeatedly said North Korea should embrace China's style of economic reform.
After several of Mr. Kim's previous trips, China also said he was there to learn about its economy. Each time, news stories and outside analysts speculated that Mr. Kim might open the North's economy and attempt to lift the country out of poverty.
Despite the official silence about the latest trip, Mr. Kim's presence in China has been well-covered by foreign journalists and by Chinese citizens using Internet sites to post pictures and comments about seeing him.
One woman with a Chinese state-run dance troupe that performed for Mr. Kim in Yangzhou posted smartphone pictures of the event a day later. And an employee of an electronics company in Nanjing on Tuesday uploaded video images of Mr. Kim arriving at his factory.
That video intrigued North Korean analysts and observers in South Korea because it appeared to show that Mr. Kim was accompanied by a woman named Kim Ok, who has long been known to be his consort and is rumored to be his fifth wife. It wasn't clear whether Mr. Kim had taken her along on previous trips.
Over the past few days, Mr. Kim visited a Chinese auto maker, an electronics manufacturer, a solar-energy company and a discount store. At the discount store, he asked a clerk for salad dressing, according to a South Korean newspaper.
Separately, the U.S. envoy for North Korea human-rights issues, Robert King, arrived in Pyongyang Tuesday for a first-ever visit. Mr. King is attempting to assess North Korea's claims that it is willing to accept American food assistance again, which it cut off in 2008 after becoming upset at Korean-speaking monitors the U.S. sent in to assure food was reaching the needy.
In a sign of North Korea's wariness of the visit, its state media did not publicize Mr. King's arrival, unlike previous trips to Pyongyang by U.S. officials and former officials or even the visit this week of representatives from the New York-based Asia Society.
Thursday, May 26, 2011
Tuesday, May 10, 2011
Rare Earths Seen Growing Less Rare
Demand for rare earth elements that has driven up prices more than tenfold since 2009 is likely to be met by a surplus of supply by 2013, as Western companies start up new mines to compete with the Chinese firms that now dominate the market, Goldman Sachs analysts predicted Thursday.
The forecast calls into question the sustainability of the current boom in rare earths, a suite of 17 elements used in products from high-powered magnets, and fuel refining to energy-efficient light bulbs and mobile phone screens, as well as the shares of companies seeking to produce them.
Prices of rare earths hovered between $5 a kilogram and $20 a kilo from the early 1990s until 2010. But a 40% cut in export quotas by China, which accounts for 90% of global rare earth production, sent prices soaring. The basket price of rare earths held in Lynas Corp. Ltd.'s Mount Weld deposit in western Australia─the largest non-Chinese mine, due to come to production in the next few years─has jumped to an average of $162.66 kilos from just $10.32 kilos in 2009.
Goldman's view differs from that of miners. In a presentation last month, Lynas forecast that global demand for rare earths, which include neodymium, cerium and lanthanum, will outstrip supply this year by 35,000 tons this year and in 2012. Annual supply shortfalls of around 20,000 tons are expected in 2013 and 2014, it added. It predicted long-term prices in the $120/kg-to-$180/kg range.
Lynas Chief Executive Nicholas Curtis says China is on the verge of becoming a net importer of the elements, a transformation that would be similar to those that drove major shifts in global markets for coal in 2009 and oil in the mid-1990s, and could accentuate the current price spike.
'China will become a net importer because its consumption for its own domestic value-added industry is going to drive very high [demand] growth for these resources. They've explored every inch of China for what's available and if they had more rare earths deposits of any size, it would be being developed now,' he said in a recent interview.
Lynas shares have risen fourfold since China announced the quota cuts in July 2010.
Goldman Sachs analyst Malcolm Southwood, however, said the price boom is nearing its peak. The supply deficit will peak at 18,734 tons this year, equivalent to 13.2% of a forecast 141,524 tons of demand, before the market slips into a slight surplus in 2013, he said in the report published Thursday. The surplus will rise to 5,860 tons or 3.2% of projected demand in the following year, the report said.
Initially, at least, prices will likely continue to rise, he said. The basket price for the Mount Weld rare earths should climb to $227 a kilogram next year, a gain of about 40%. Prices may eventually moderate to an average of $82 a kilogram, but that will happen only in 2015, the third consecutive year of a global surplus, the report said.
'We envisage a closely balanced market in 2013, and modest surpluses thereafter─at least, for some of the more abundant light rare earths─with some price softening in the 2013-2015 period,' according to the report.
Goldman's view matches the outlook of many other market participants who believe the current boom is overdone. 'For [the rare earths such as] cerium and lanthanum, there will certainly be some surplus,' said a major European rare earths trader, who didn't want to be named because of the sensitivity of trading relationships.
'When you have these high prices, people immediately start to look for substitutes, and it takes one to two years, but people can switch out of rare earths.'
He cited the glass industry, which has replaced its consumption of cerium with selenium over the past year as prices of the rare earth rose to $135 per kilo currently from just $3.88 per kilo in 2009.
Other analysts see prices falling much closer to historic averages as new projects come onstream, particularly if continued high prices encourage the development of major deposits such as Greenland Minerals & Energy Ltd.'s Kvanefjeld site, which is more than twice the size of Mountain Pass and Mount Weld combined, but located on an isolated mountainside just south of the Arctic circle.
'Lynas has said their production costs are $10 per kilogram. If they think they can sell their material at $150 a kilogram, a markup of 15 times, I don't know customers are going to be prepared to pay for it,' said Dudley Kingsnorth, executive director of cole haan shoes Company of Australia, a rare earths analysis house.
'Once these new mines come onstream, there will be a fall in price, and if miners insist on multiples of 15-20, they're going to face more competitors. They're going to have to face a little bit of reality.'
The forecast calls into question the sustainability of the current boom in rare earths, a suite of 17 elements used in products from high-powered magnets, and fuel refining to energy-efficient light bulbs and mobile phone screens, as well as the shares of companies seeking to produce them.
Prices of rare earths hovered between $5 a kilogram and $20 a kilo from the early 1990s until 2010. But a 40% cut in export quotas by China, which accounts for 90% of global rare earth production, sent prices soaring. The basket price of rare earths held in Lynas Corp. Ltd.'s Mount Weld deposit in western Australia─the largest non-Chinese mine, due to come to production in the next few years─has jumped to an average of $162.66 kilos from just $10.32 kilos in 2009.
Goldman's view differs from that of miners. In a presentation last month, Lynas forecast that global demand for rare earths, which include neodymium, cerium and lanthanum, will outstrip supply this year by 35,000 tons this year and in 2012. Annual supply shortfalls of around 20,000 tons are expected in 2013 and 2014, it added. It predicted long-term prices in the $120/kg-to-$180/kg range.
Lynas Chief Executive Nicholas Curtis says China is on the verge of becoming a net importer of the elements, a transformation that would be similar to those that drove major shifts in global markets for coal in 2009 and oil in the mid-1990s, and could accentuate the current price spike.
'China will become a net importer because its consumption for its own domestic value-added industry is going to drive very high [demand] growth for these resources. They've explored every inch of China for what's available and if they had more rare earths deposits of any size, it would be being developed now,' he said in a recent interview.
Lynas shares have risen fourfold since China announced the quota cuts in July 2010.
Goldman Sachs analyst Malcolm Southwood, however, said the price boom is nearing its peak. The supply deficit will peak at 18,734 tons this year, equivalent to 13.2% of a forecast 141,524 tons of demand, before the market slips into a slight surplus in 2013, he said in the report published Thursday. The surplus will rise to 5,860 tons or 3.2% of projected demand in the following year, the report said.
Initially, at least, prices will likely continue to rise, he said. The basket price for the Mount Weld rare earths should climb to $227 a kilogram next year, a gain of about 40%. Prices may eventually moderate to an average of $82 a kilogram, but that will happen only in 2015, the third consecutive year of a global surplus, the report said.
'We envisage a closely balanced market in 2013, and modest surpluses thereafter─at least, for some of the more abundant light rare earths─with some price softening in the 2013-2015 period,' according to the report.
Goldman's view matches the outlook of many other market participants who believe the current boom is overdone. 'For [the rare earths such as] cerium and lanthanum, there will certainly be some surplus,' said a major European rare earths trader, who didn't want to be named because of the sensitivity of trading relationships.
'When you have these high prices, people immediately start to look for substitutes, and it takes one to two years, but people can switch out of rare earths.'
He cited the glass industry, which has replaced its consumption of cerium with selenium over the past year as prices of the rare earth rose to $135 per kilo currently from just $3.88 per kilo in 2009.
Other analysts see prices falling much closer to historic averages as new projects come onstream, particularly if continued high prices encourage the development of major deposits such as Greenland Minerals & Energy Ltd.'s Kvanefjeld site, which is more than twice the size of Mountain Pass and Mount Weld combined, but located on an isolated mountainside just south of the Arctic circle.
'Lynas has said their production costs are $10 per kilogram. If they think they can sell their material at $150 a kilogram, a markup of 15 times, I don't know customers are going to be prepared to pay for it,' said Dudley Kingsnorth, executive director of cole haan shoes Company of Australia, a rare earths analysis house.
'Once these new mines come onstream, there will be a fall in price, and if miners insist on multiples of 15-20, they're going to face more competitors. They're going to have to face a little bit of reality.'
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