The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.By Dave Fessler NEW YORK ( Investment U) -- Let's say you own products that satisfy 98% of the world's demand for them. How would you handle such power?
- Responsibly, knowing that it's critical to economies and people everywhere?
- Irresponsibly, holding the world hostage by raising the price as much as you want and raking in the profits?
China's Triple-Digit ShockerChina's announcement on Tuesday is nothing new. The country has raised rare earth prices by $10,000 per month since last July (when a ton of the metal cost a "bargain" price of $14,405). At the same time, China has also been reducing its exports of rare earth elements since last year. Why? Because its ultimate goal is to keep all the rare earths it produces. Nevertheless, when I saw the price breach triple-digit territory, I couldn't help revisit the subject, as it has obviously shocked China's rare earth industry customers. Unfortunately, they have few options available in the short term, other than to pay China's exorbitant asking price. In the long term, however...
The Western Challenge to ChinaAs commodity guru Rick Rule likes to say, "The cure for high prices is high prices." And over the longer term, it won't matter what China does. It's a fairly safe bet that other rare earth producers around the world will be pulling out all the stops to increase production at existing mines, or hasten the development of their mines if they haven't already. Not too surprisingly, shares of rare earth companies outside of China's stranglehold soared on the news. Last Friday in my article on the rare earth industry, for example, I mentioned development-stage rare earth producers that are based right here in the West (mostly Canada).
- Rare Element Resources (REE): $534 million market cap.
- General Moly (GMO): $476 million market cap.
- Avalon Rare Metals (AVL): $688 million market cap.