Indications this week that China is moving closer to an all-out ban on exports of its valuable rare earths resources to the US is seeing activity in the space continue to heat up.

Macro Business reported that China’s National Development and Reform Commission said during a press conference on Monday it was developing new state policies on rare earth metals, and planned to make them public as soon as possible.

This potential supply crisis is seeing rare earths prices hit new highs.

Just check out what has happened with the neodymium price:

Neodymium price, Pensana Metals
Source: Pensana Metals

Neodymium and praseodymium (NdPr) are expected to play a key role in the rapidly expanding green energy and electric vehicle sectors.

NdPr is used to make high-strength permanent magnets for the drivetrains of next generation EVs.

Other rare earths are following suit:

Rare earths prices, Reuters
Source: Reuters


Demand will far surpass supply

Demand for NdPr is forecast to outstrip supply within the next five years — possibly as early as 2020, according to Adamas Intelligence.

Last year China produced around 80 per cent of global NdPr supply and is estimated to account for 85 per cent of consumption.

But as a result of the Asian behemoth’s growing internal needs, it is forecast to become a net importer of NdPr by 2022.

The rare earths market started to hot up in March, when global rare earths heavyweight Lynas (ASX:LYC) became the target of a $1.5 billion takeover play by Wesfarmers (ASX:WES).

Lynas rejected that bid, but you know when a major like Wesfarmers wants in on the rare earths market something has to be up.

Guy Le Page, director and responsible executive at Perth-based financial services provider RM Corporate Finance, told Stockhead last month that he expects to see “some serious shortfalls” in supply coming sooner rather than later.

>>Read: Money Talks: RM Corporate Finance director Guy Le Page’s top rare earths, iron ore and tech picks 

On Wednesday minnow Krakatoa Resources (ASX:KTA) revealed it planned to acquire a rare earths project in Western Australia that was once explored by heavyweight BHP (ASX:BHP).

That news sent shares up as much as 65 per cent to an intra-day peak of 3.8c.

Up until now, Krakatoa has been exploring for a bunch of other metals including tantalum, lithium, niobium and cobalt.

But this prospective patch of land, known as the Mt Clere project, has caught the junior’s eye.

“We have been looking at rare earths for some time and it was just a matter of finding the right project and obviously for the right price,” chairman Colin Locke told Stockhead.

Sampling at the project by BHP between 1985 and 1987 uncovered numerous highly prospective areas for thorium and rare earths.

Locke said that recent events indicated that this shortage of rare earths didn’t appear to be going away.

“We believe that this is probably going to be a long-term shortage,” he said.

“There’s not many others that we know of coming online and so this shortage looks poised to continue with China potentially using it as a weapon so to speak.

“We think it’s the right thing to be in at the right time.”


Big instos taking bigger positions

Last week big institutional investor Fidelity doubled its stake in Pensana Metals (ASX:PM8) to 10 per cent after sinking an extra $1.7m in the junior via a couple of on-market transactions and a recent placement.

Boston-based Fidelity is one of the world’s largest equity funds with about $US2.5 trillion ($3.6 trillion) invested. Fidelity was also previously a major investor of Lynas.

Pensana is advancing its Longonjo NdPr project in Angola.