{"id":6190,"date":"2011-07-23T02:16:39","date_gmt":"2011-07-23T06:16:39","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=6190"},"modified":"2011-07-23T02:16:39","modified_gmt":"2011-07-23T06:16:39","slug":"seagate-blames-bubble-in-rare-earth-prices","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2011\/07\/23\/seagate-blames-bubble-in-rare-earth-prices\/","title":{"rendered":"Seagate Blames A “Bubble” In Rare Earth Prices for Causing A Margin Squeeze"},"content":{"rendered":"

(This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece<\/a>.)<\/strong><\/p>\n

For some time now, rare earth supply, demand, and prices have been hot topics of discussion and debate. While these elements are critical components in many high-tech products, they usually represent a very small part of overall product costs. While the Japanese have clearly been scrambling to reduce their dependence on Chinese exports and to otherwise secure greater supplies, I have never heard a company complain that soaring rare earth prices were materially hurting profit margins…until now.<\/p>\n

Seagate Technology (STX), a manufacturer of hard drives and provider of storage solutions, warned during its earnings report on July 20<\/a> that rare earth prices are starting to squeeze its profit margins. In particular, soaring prices over the last two months or so have hit the company hard. <\/p>\n

{snip}<\/p>\n

If Seagate is specifically relying on Molycorp to eventually relieve the supply crunch in the near future, they may be disappointed. On July 11, BBC News quoted Jim Sims<\/a> from Molycorp claiming that “…as China’s exports are being restricted, we are looking at outright shortages of rare earths, probably this year and next…”<\/p>\n

Moreover, I have cited other references in a previous post challenging claims that rare earths will be plentiful as early as 2013 (see “Chinese Academic’s Rare Earth Forecasts at Odds With Industry Experts<\/a>“). In other words, the “bubble” in rare earth prices will likely last a lot longer than consumers like Seagate expect (or at least hope!).<\/p>\n

Be careful out there!<\/p>\n

Full disclosure: net long MCP<\/p>\n","protected":false},"excerpt":{"rendered":"

(This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece.) For some time now, rare earth supply, demand, and prices have been hot topics of discussion and debate. 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