Prices are information - critical minerals edition

Just a little note from the frontlines of the real economy.

We’re oft told that the world is running out of metals and minerals. That’s why we need to recycle everything at whatever the cost. Simply because if we don’t then we’ll run out.

This is not true.

A circular economy is a very fine idea if the resource consumption - that is, the cost - is lower doing it that way. But it’s not necessary for the reason that we’re going to run out if we don’t recycle everything.

Australian miner Lynas posted a slump in third-quarter sales revenue on Wednesday, missing analyst expectations on the back of a plunge in prices for rare earths, ……"There's a general consensus that the current price is below cost for many Chinese producers.” …. The firm's quarterly sales revenue fell to A$101.2 million ($65.64 million) in the three months to March 31, down from A$242.8 million a year earlier.

Rare earths prices are, as above, below production prices. That’s not quite and wholly true, in mining we make the difference between mere operating costs and all in costs. It’s entirely possible to be below those all in costs - covering those capital costs - and still rationally producing if prices are above mere operating costs.

But rare earth prices are as above. Further, the lithium price is below the operating costs of some to many mines, including recently opened ones. The cobalt price is below that all in cost for many producers.

Rare earths, lithium, cobalt, the three we need from that critical minerals list for this electric revolution. There’s so much out there that they’re not worth the cost of digging them out of the ground. Which does rather kill off that idea that they’re in such short supply that we must, at whatever cost, recycle them all.

As we say, if it’s cheap to recycle them then do so by all means. But prices really are information - we’ve not got a shortage of them.