Thursday, April 21, 2011

Avalon (AVL) (GMO) (REMX) (OSN) Close Up on Rare Earths Demand

Rare earths miners have been moving up quickly since the announcement by China it's going to cut back on exports significantly. Some have been pulling back after the recent surge, although companies and ETFs like General Moly (AMEX:GMO), Avalon Rare Metals (AMEX:AVL), Market Vectors Rare Earth/Strategic Metals ETF (NYSE:REMX) and Ossen Innovation Co., Ltd. (NYSE:OSN) closed up Wednesday.

Expectations are rare earth supply will remain tight for at least five years, even with the media hype of all the projects coming on line. Those will take years to go through the process before production begins.

According to Molycorp CEO, Mark Smith, there will probably be two coming on stream within that five-year period. At the same time rare earths demand is estimated to double annually.

That means those companies that already have operations online should enjoy significant pricing power during that time.

As to the foolish proposal by big-government politicians concerning the Rare Earth Supply-Chain Technology and Resources Transformation Act, the last thing we need is for the government to use yet another so-called crisis or "national security" issue to be used to expand government in a useless manner as is being attempted.

The markets should and will sort it out, as it has already began to do.

General Moly closed Wednesday at $5.27, gaining $0.18, or 3.54 percent. Avalon Rare Metals closed at $8.88, up $0.09, or 1.02 percent. Market Vectors Rare Earth/Strategic Metals ETF ended the day at $27.59, jumping $0.48, or 1.77 percent. Ossen Innovation Co., Ltd. closed at $3.32, rising $0.09, or 2.79 percent.

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