Johannesburg, South Africa -- (SBWIRE) -- 11/23/2011 -- After nearly three years of soaring prices for rare earth metals, with the cost of some rising nearly thirtyfold, the market is rapidly coming back down. Rare Earth stocks have struggled in recent weeks as disappointing earnings reports from some of the industry's up and coming stars cooled optimism in the sector. Additionally, a dramatic downturn in demand for the metals has caused prices to slide.

International prices for some light rare earths, like cerium and lanthanum, used in the polishing of flat-screen televisions and the refining of oil, respectively, have fallen as much as two-thirds since August and are still dropping. Prices have declined by roughly one-third since then for highly magnetic rare earths, like neodymium, needed for products like smartphones, computers and large wind turbines. Prices of rare-earth minerals have dropped 27 percent from their peak this year as Chinese exports increased, boosting inventories, according to analysis from Bloomberg Industries. China mines 94 percent of the rare earth metals in the world. Through 2008, it supplied almost all of the global annual demand outside of China (50,000 to 55,000 tons). China cut its export quotas to a little more than 30,000 last year and again this year and imposed steep export taxes, prompting prices and shares of rare-earth mining companies to rise. As demand for rare earths wilt outside China, speculators are dumping inventories, feeding the downward plunge. Cerium peaked at $170 a kilogram, or $77 a pound, in August but now sells for $45 to $60 a kilogram. Prices are negotiated by buyers and sellers directly with one another and reported by market information companies like Asian Metal, based in Pittsburgh. That is still far above cerium’s price of $6 a pound three years ago, before China, the world’s dominant producer, sharply cut its export quotas.

Big companies in the United States, Europe and Japan that use rare earths in their manufacturing have been moving operations to China, drawing down inventories, switching to alternative materials or even curtailing production to avoid paying the extremely high prices that prevailed outside China over the summer. Molycorp (MCP), the largest rare earth stock, was hit hard on Friday after reporting its earnings after the close the prior day. Even though the net income was $48.4 million, up sharply from the net loss of $10.1 million in the same quarter last year, earnings per share missed analyst estimates by three cents. Molycorp also reported that its new Project Phoenix is ahead of schedule, and by the end of 2012, the company should be significantly increasing their production of rare earth oxides. Some fundamental analysts who follow this sector are concerned that this will make the rare earth metals less rare, and therefore, will push down prices.

Molycorp Inc., owner of the largest rare-earth mine outside China, said new developers may face difficulty funding new operations as prices plunge. Mining companies including Molycorp and Lynas Corp. are spending at least $6 billion developing mines to meet demand for the elements used in applications ranging from electric cars to missiles.