Word came out yesterday that the Obama administration will be adding rare-earth-mineral-market manipulation to its long list of Chinese trade practices it's trying to change. The U.S. will join the European Union and Japan in asking the World Trade Organization to open talks with China about its export restrictions. More likely than not, this will become a WTO case in the future.
It's China's restriction of rare-earth-mineral exports that have sent shares of Molycorp
It's no secret that China marches to the beat of its own drum when it comes to WTO rules. This rare-earth dispute is no different. China has kept the price of rare-earth minerals low in China as they have crept up around the world, giving a distinct advantage to Chinese manufacturers. The stakes for U.S. businesses are high.
Who is pushing the issue?
If more supply would be bad for Molycorp and other miners, who would it help? The hybrid vehicle, computer memory, and wind turbine markets would be the first winners. Toyota
Foolish bottom line
Rare-earth-mining stocks are up today, probably on the speculation that a dispute could take years to resolve and China would be less likely to open up the rare-earth-mineral market. But I really see no upside for miners today. The only upside is if China cuts exports further, something it may not do under the current scrutiny, which means China is more likely to increase exports, hurting prices. Miners need prices to remain high or their mines may end up being mothballed, which has happened before.
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