Rare Earths (REE) (AVL) (MCP) Price Jump May Be Overblown

While in the short term the price surge in rare earths is justified, as has been the performance of some of the miners outside of China like Avalon Rare Metals (AMEX:AVL), Rare Earth Elements (AMEX:REE) and Molycorp (NYSE:MCP).

But over the long term, prices of rare earths and the rare earths miners outside of China may be overpriced, or may be priced in at the current rates.

The Telegraph noted, "China is doing two things with its policy. It is protecting against foreign ownership of strategic resources and at the same time creating incentives for foreign companies to bring their manufacturing to China. The West has grown used to cheap raw materials, but is going to have to get used to the fact that prices are going up as countries scramble to secure finite resources."

"I've been in this business for 20 years and never seen anything like it. The reality is that China dominates the rare earths industry and it has a very clear policy of seeking to take those rare earth metals into value-added products and that is a concern in many people's minds. But if you look at production coming on-stream in the next 10 years, the situation is not as dire as people make out."

Still, as mentioned, in the short term China is definitely in control, and how they export their rare earths will determine the overall price of the minerals until more companies increase production to match the loss of access to a portion of the rare earths.

Rare Earth Elements was trading at $10.38, down $0.02, or 0.19 percent, as of 12:16 PM EDT. Avalon Rare Metals was trading at $6.61, gaining $0.17, or 2.64 percent. Molycorp was at $43.60, falling $0.38, or 0.86 percent.