Precious Metal Prices Getting you Down???

OK, so I used the creative license offered to me as a blog writer to come up with the title as play on words. Precious metals go up and down in prices (mostly up for the last few years) and as the main ingredient for precious metal nanopowders are the precious metals themselves, they too fluctuate according to the price of the base metals.

Platinum, gold and silver are the main precious metals you read about in the paper with gold being the forefront. It’s safe to say for the last few thousand years or so gold has been the most sought after metal around. Columbus didn’t exactly try to discover the new world for the large amount of tin found here.

As the swings in prices of gold affect speculators, the prices typically don’t affect you or I on a day to day basis. It’s not like we go to the store and buy 3 ounces of gold with the iceberg lettuce. Sure, jewelers and investors are affected but not you or I. What’s interesting is that many researchers, institutions, and corporations who test and research and ultimately use those nanopowders in production are impacted immediately. Perhaps a budget for certain elements are $100 and the price increases by 10%. The researcher is going to have to make cuts. As I state the obvious, the research and development is where the real work takes place. It’s those guys on the trenches who create or make that existing product cheaper, better, longer lasting that you and I sometimes take for granted. With less resources at their disposal, the work they try to complete is more difficult.

Solar World Settling Down???

Since the last week of 2011 and the beginning of this year prices for one of the major components in the Solar World, polysilicon, has rebounded. This is good news for all involved as it appears some stability that I had pointed out in earlier posts has begun to appear.

For an industry to boom companies typically need to make money. This does not count on the Silicon Valley startup boom of the late 90s that led to the meltdown in 2000. Since then even startups are generally required to make money before more money is fed to them. That being said, if polysilicon prices stabilize and perhaps increase in price then the main providers of polysilicon can finally get back to making money. I don’t know if we are there yet but at least we are closer and the trend is positive.

Why is this important? For starters there can be more competition creating greater efficiencies, better long-term prices, and increased ingenuity and product improvements from the manufacturer down to the installer. Less competition is never good. Remember what the phone company was like in the 1970s??? I don’t ever want to go back to those kinds of days.

I’ll keep you posted on what trends I am seeing as well as my 3 cents (inflation, you know).

Rare Earth Material Conundrum

China has been successfully challenged at the WTO (World Trade Organisation) for restricting exports of raw materials. Here are some things to think about:

1. If China drops tariffs, etc. then prices will drop.
2. If prices drop too much then new mines hoping to open up in the next few years might just shut down before they even open up fully because they would be unprofitable.
3. Competition might not improve from outside of China because it’s not “worth the risk/return”.
4. Substitutes for rare earth materials or efficiencies might not be created.

Quoting an oil expression is that “the best cure for high oil prices are high oil prices”. Example is that high oil prices create more competition and ingenuity such as efficiencies, alternatives such as electric cars, and less use of vehicles are some ways that high oil prices would be battled. Oil is still expensive but there are solutions underway. So before we jump to the conclusion that rare earth prices should come down I believe the prices should stay where they are and we should be happy they are not low. Otherwise, it may be too late and it’s another “here we go again” moment.

Year of the Dragon – Chinese New Year

Chinese New Year was on Monday and the Year of the Dragon has commenced. How do I know this? My 4 year old daughter came home from pre-k with a dragon mask that she made in school and told me. That and her education of Ni Hao Kai-lan eclipses my knowledge base for the week.

So now that the New Year is upon us how will this impact us Westerners on the other side of the pond….here are my thoughts….

1. As mentioned in an earlier article that typically the economy has to be good for the President of the USA to be re-elected. The economy isn’t good. So, the President will try to make the economy good. If they pump a lot of money into it more jobs will be created, less unemployment, more money created, etc. The economy will be good and the stock market will do well. OK, I dummied up the English in this paragraph but it’s to make a point that the White House will do everything in it’s power to boost the economy in a positive light.

2. If the economy is going well then industry will buy more materials. If memory serves me correctly the shelves are bare but companies have a lot of money. If the above holds true manufacturing will start to build up and inventory levels will also build…good stuff for everyone down the line. Prices should stabilize and hopefully everyone prospers.

3. That means that in the true market economy that stabilization should take effect unless there are acute shortages. So I look for stabilization of the rare earth materials and elements until supply reaches demand which could take a year or longer. This also will impact solar cells and polysilicon in a positive light. That industry has been in a death spiral for the last 6 months.

We’ve been in a recession/depression for quite some time. Unemployment has been high, homes have been foreclosed and the general “friendly” business atmosphere has been uterly despicable. Perhaps the Year of the Dragon will be the difference that everyone has been looking for…only time will tell.

SkySpring Nanomaterials is a provider of high purity elements, compounds, and rare earth materials. Please check us out at www.ssnano.com

Heavy Rare Earth Materials – Far East Rising

China produces roughly 90% of the world’s rare earth materials. It wasn’t always like that…but then again, what is?  Since usage has increased and sovereign needs are typically higher than foreign for heads of state, China has enacted quotas on the materials as to make sure they have enough for themselves.  The quotas established for rare earth materials in China have been changed a bit. China’s projected quota will be roughly 31,000 tons of rare earth material. Compared with 50,000 tons in 2009 you see things have changed.

Before China said a rare earth material is a rare earth material…much like “parts is parts”. But now, the heavy rare earth materials (those with atomic numbers of 64-71) will only be 10-15% of the entire quota. I suspect abuse in the system for this change. As the heavy rare earth materials are often more expensive and greater profits, the traders wanted to export those instead of the cheaper and less profitable light rare earth materials.

Prices of light rare earth materials have been coming down and may continue to do so but if my economics degree is worth it’s weight in Europium I would say the heavy rare earth materials to stabilize or increase in price. We’ll see how this unfolds during the year.

SkySpring is a manufacture and distributor of both light and heavy rare earth materials.

 

Elements, Economy, Industry and Politics

Economy, Industry, Elements, and Politics

Question:
What do those four things have in common???

Answer:
Presidential terms.

I read something interesting some years ago and I thought it would be interesting to look it up again and see if it holds true. First of all, the best day to buy stock is typically Monday and the best day to sell it is Thursday afternoon. Rational is that companies put out good news on Mondays and bad news on Fridays. Besides, all of the notorious big-loss days have been on Fridays. Other days of the week are Wednesdays to buy and Tuesdays to Sell but the main ones are Mondays – Buy, Thursday afternoon – Sell.

How does this deal with elements, politics and industry? Absolutely nothing. But the next interesting thing I decided to look up again is related. The first two years of a presidential first term president are typically bad but the third and fourth years of the president (first term) have always been very good.I could not get details broken down by the first or second term presidents but this is the average stock market returns by presidential year in office:

Year 1: 4.5%
Year 2: -1.2%
Year 3: 18%
Year 4: 6.7%

Typically, a first term president wants to become a second term president and the first two years they slash budgets and do everything they hoped to do. Then, they need the economy moving to get re-elected and then look at the numbers. First two years a 3% gain combined, second two years 25% combined.  Hmmm….very interesting. BTW, in the last 50 years only 3 subpar 4th year stock market returns were achieved. Each of those years the incumbent party lost their race (1960, 1980, 2008).

If the market is moving, then industry is moving along very well. Companies are purchasing and selling more products and using more materials (elements, compounds, CNTs, rare earth materials, etc.) and the political incumbents would be doing well. So, if the economy will most likely do very well in 2012 helping all involved to very merry and prosperous year.

You can get your elements, powders, compounds, rare earth materials and nanotubes from SkySpring Nanomaterials today!

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Pricing Trends for 2012

I just watched the movie “Margin Call” last night and it reminded me of how volatile the markets for Rare Earth materials and Polysilicon are. I know of several companies that won’t buy Polysilicon because the price was still going down. Although this last week the spot price did rise ever so slightly. For internal company reasons/politics, many companies won’t do dollar cost averaging which is essentially to keep buying as the price goes lower or higher. This would ensure them that they don’t pay the highest or lowest price but it will all average out. Since the price can be lower many companies don’t buy like this because if the price drops they feel they will be paying too much and that they might have egg on their face. Conversely, companies don’t have the problem of buying when the price goes up. I guess it’s another example of irrational exuberance.

In the movie there was extreme volatility (CMO, MBS, etc. from the Wall Street meltdown of 2008) and that’s what we are seeing now. Prices at all-time lows, prices inflated but now dropping, etc. Truth of the matter is that prices will settle down eventually. People will come to their senses once many have already succumb to the frenzy. In “Margin Call”, Jeremy Irons said “It’s not panicking if you sell first”. In the new year I feel that prices will stabilize as they always do. Because if prices have dropped 50%, for example, does the risk represent the same risk before the price drop? Even though there is increased volatility the price drop does not increase your risk but rather decreases it substantially. Warren Buffet has argued this point endlessly.

My opinion is that prices will stabilize and these markets will resume to normal in the coming year. Necessity is the mother of invention and we desperately need some stability. The market will show some bumps but, as always, will come back to normal after weeding out the ones who were either late to the party or panicked and left the business all together.

SkySpring Nanomaterials is a leading provider of High Purity Elements, Compounds, and Rare Earth materials to industrial, research, and institutional clients worldwide.