Lynas Corp. Ltd. (LYSCF)

[Pro-Life]

Molycorp, Lynas Surge As China Eliminates Export Tariffs On Rare Earths

| Apr. 27, 2015 11:00 AM ET | About: Molycorp, Inc. (MCP), LYSCF, Includes: LYSDY
Disclosure: The author is long MCP, LYSCF, LYSDY. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

http://seekingalpha.com/article/3105466-molycorp-lynas-surge-as-china-eliminates-export-tariffs-on-rare-earths

Summary

- Reports have surfaced that China plans to eliminate export tariffs on rare earths.

- Lynas' CEO believes such a move will prompt buyers to return to the rare earth market.

- Any evidence of a substantial increase in demand could send shares of Molycorp and Lynas violently higher.

According to the Financial Times China has decided to eliminate export tariffs on rare earth metals:

China will eliminate its export tariffs on rare earths and other metals, the Ministry of Finance said on Thursday, ending a controversial policy that caused a diplomatic row and international trade dispute ... Eliminating the tariffs is part of a more general streamlining designed to reduce the red tape that allows corruption to flourish at government departments and state-owned enterprises.

An export tariff is essentially a tax on products exported from a particular country. They increase export costs and can hurt demand for a particular product and create trade barriers. One would think the elimination of the export tax would drive down prices and cause angst for rare earth miners Lynas (OTCPK:LYSCF), (OTCQX:LYSDY) and Molycorp (NYSE:MCP); however, Lynas' CEO believes the move will unleash pent up demand for rare earths:

Users have been drawing down on stockpiles while awaiting clarity over China's policy on the export of the elements, Amanda Lacaze, Chief Executive Officer of Malaysia-based Lynas, said in an interview ... "In the short term, a lot of what has been damping demand will be released," Lacaze said today by phone. "Some customers have been living off inventories and they'll come back and start placing orders."

Molycorp And Lynas Need Demand To Increase

Both Lynas and Molycorp have been reeling from stagnant demand for rare earths, yet the rare earth tariffs have created some hope.