One of my many former employers, the Singapore Straights Times, reported yesterday that China planned to cut rare earth export quotas by 30% next year. The story comes on the heels of a voluntary ban of exports to Japan on September 21, after their arrest of a Chinese fishing boat captain (which we we reported on in "Have You Seen Molycorp Lately").
Traders went apoplectic, taking my lead stock, Molycorp (MCP), up a mind boggling 30% in three days, matched by a 27% pop in Canada's Avalon Rare Metals (AVARF), and a 10% gain by Australia's Lynas Corp. (LYSCF). Lynas is now up an unbelievable 473% since I first recommended it five months ago (see our reporting in "Rare Earths Are About to Become a Lot More Rare"). This is like hitting four back-to-back home runs (I'm using baseball metaphors this week, since the hometown San Francisco Giants are in the play offs).
As China controls 97% of the world's rare earth production, and consumers are desperate to lock in supplies so they can build everything from hybrid cars to IPods to heat seeking missiles, you can expect to hear a lot more about this space. I have already seen the odd story showing up in the mainstream media. Not only that, in the future I expect to see similar developments across the entire resource space, including precious metals, copper, iron ore, molybdenum, tin, nickel, aluminum, and all of the food groups. We are on the eve of the era of The Great Resource Shortage.
This originally was posted in the Diary of the Mad Hedge Fund Trader.