Home > Market change > Brazil’s Vale gears up for rare earths

Brazil’s Vale gears up for rare earths

May 31, 2011

“Vale, the world’s biggest iron ore producer, is gearing up to move into rare earth mining as Brazil tries to compete with China to supply some of the world’s most sought-after metallic elements, says Brazil’s science and technology minister, Aloizio Mercadante. The government has met several industrial companies to line up customers for rare earths, a group of 17 elements which are primarily used to make components for such items as wind turbines, electric cars, and computer screens.

‘Vale would bring big benefits to Brazil by entering into this rare earth market and I think it’s an important thing for the west as a whole. It would also benefit Vale as a company,’ Mr Mercadante said. Vale confirmed it was looking at investing in the production of these metallic elements, adding that the project was still at a ‘preliminary stage’. Prices for rare earths, such as cerium oxide, have risen fivefold since January after China, which produces 97 per cent of the elements, started clamping down on exports.”

Source: Financial Times, May 30 2011

Observations:

  • Chinese export restrictions on rare earths have drawn global attention to the risks of having China produce 97% of the total global production of these raw materials to high-tech products.
  • Brazilian company Companhia Brasileira de Metalurgie e Mineracao (CBMM) already produces the rare earth niobium. The government is now aiming to start producing some of the minerals for which China holds a more dominant position, partly to stimulate the domestic high-tech industry.

Implications:

  • Apart from rare earths being a potential source of profits for Vale contributing to the government’s push to make Brazil a producer will help the new CEO develop goodwill with the government. Small concessions like these could help Vale sustain independence in more impactful iron ore related issues later.
  • The enormous increase in rare earth prices after the export restrictions by China are not expected to last for very long. Many other countries and companies are looking into starting up production; a development that is not so much slowed down by the ‘rareness’ of the ores, but more by the time required to set up the recovery process.

©2011 | Wilfred Visser | thebusinessofmining.com

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