Rare Earth Prices and the Baltic Dry Index post-Bubble

...maybe because they have gravited back to...earth...!

Scott Barber, of Reuters Alpha, had a lucid observation on this topic:

"Last year, China clamped down on exports of sought-after rare minerals and sent prices soaring. That action now is bringing new supplies on stream, just as demand has flattened up, causing a decline in prices that is nearly as dramatic."

...he adds:

"The first law of economics – that of supply and demand – then kicked in. As prices soared, new mining projects made it on to the front burner, and some of these are likely to come onstream before the end of the year, including an expansion to Molycorp’s (MCP.N) California operations. China remains by far the world’s largest producer of these materials, but as new supplies elsewhere hit the market while demand remains little changed, China itself also is changing its tune and has announced a higher export quota. For now, the sharp drop in prices is a reminder that these elements earned the moniker “rare” more for the difficulty in extracting and processing them than for their scarcity."

It’s interesting, that many themes that China get associated with end up in bubbles and/or crashes territory! Or maybe it just inflates what it imports, and it deflates what it exports.

We can make a similar case for the Baltic Dry Index from 2002 to 2007,

In 2007-2008 we had the Baltic Dry Index euphoria, a similar pattern, whereas China was on its way to monopolize the capacity of world maritime transportation.