Monday, April 11, 2011

Molycorp (MCP) (REE) (AVL) Jump on (JPM) Rare Earths Price Estimate

JPMorgan Chase & Co. (NYSE:JPM) raised its price outlook for rare earths and Molycorp Inc. (MCP), Rare Element Resources (REE), and Avalon Rare Metals (AMEX:AVL) all soared in response.

“While China is expected to produce roughly 120k tons of rare earths in 2011, production quotas stand at 93.8 tons, with the difference largely due to illegal mining. If China only allowed 93.8k tons to be produced (which we are not arguing for at this point) and allowed roughly 28k tons to be exported, the resulting 65.8k tons of supply would not meet domestic demand of roughly 75k tonnes. While we don’t think we will see such a deficit this year, we think prices are rising as China cuts back on illegal mining, takes significant supplies from both the export and domestic markets, and causes jittery buyers (even in the domestic market) to worry about tighter markets in the foreseeable future,” JP Morgan analyst Michael Gambardella

Avalon was trading at $9.64, gaining $0.36, or 3.88 percent, as of 2:46 PM EDT. Rare Element Resources was at $15.43, up $1.01, or 7.00 percent. Molycorp was trading at $70.69, rising $3.50, or 5.21 percent.

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