China's grip on the rare earth element market has been present for years, but it wasn't until last year that it became a national story how important these elements were.
Now, word out of China is that the country is building strategic reserves of the "not so rare" elements as the rest of the world ramps up production. The timing is a bit curious, considering Molycorp
Reserves of rare earths are a hot topic outside of China as nations try to figure out if Chinese supply cuts will lead to a manufacturing slowdown. Japan and South Korea have some reserves and the U.S. is at least considering the idea. With control of the market already, I have to wonder what the end game is for China?
China has put rare earth miners out of business before by flooding the market with product, could they be at it again? Molycorp's Mountain Pass mine was once the main source of rare earths until it closed in 2002 after China got in the game.
Last year China helped push aluminum prices down by releasing some of its aluminum reserves. Since no one knows how the country will manage rare earth reserves, this only adds more questions to rare earth stocks going forward.
China definitely likes stability and a reserve of rare earth elements would give the country another way to control prices and supply in the market. I'm not sure if that's good news or bad news for rare earth prices?
Now it looks like investors will have to watch rare earth export levels, demand, production, and also how well reserves are building at the national level. If the last six months haven't been interesting enough for rare earths, we should be in for many more surprises in 2011.
Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.
Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
Could This Deal Bring Molycorp Back From the Dead?
This struggling specialty miner just got a long-term deal. Will it be enough to stop the bleeding?
Why Molycorp Inc's Shares Plunged 18% Today
Is this meaningful or just another movement?
Molycorp Inc. Tumbled After China Did This but Its Fate Was Already Sealed
The U.S.-based rare-earth miner was already struggling to stay afloat so China's decision to end export restrictions on the minerals won't have much impact.