Neo Material expects still-higher rare earth prices

Fri Mar 11, 2011 12:09pm EST

* Will introduce largest price increase ever in June

* Expects strong profits for next few quarters

* Considered listings on other exchanges, but not priority

* Shares down 4.48 pct at C$8.32 on TSX

By Julie Gordon

TORONTO, March 11 (Reuters) - The price of rare earth oxides will continue to rise as Chinese producers demand more money for concentrate and speculators stockpile metals, the head of Neo Material Technologies NEM.TO said on Friday.

"Since the Chinese new year holidays, we've seen an unprecedented increase in rare earth prices in the domestic Chinese market," Chief Executive Constantine Karayannopoulos said on a conference call with analysts.

"We suspect there will be a few more months of this pricing environment before things stabilize and possibly reverse."

The cost increases are being driven by miners "aggressively increasing concentrate prices", by speculators hoarding oxides, and by producers holding on to rare earth products in anticipation of even higher prices, said Karayannopoulos.

Neo Material is one of the few Western companies producing rare earth oxides, rare earth magnets and magnetic powders. The company operates in China, Thailand and North America.

Rare earths are increasingly in demand as China, which has a near monopoly on global supply, clamps down on exports of the key metals used in technology items like smartphones.

Karayannopoulos said the Toronto-based company would introduce its "biggest ever" price increases in June in response to the higher costs.

He noted that he does not expect Chinese export quotas to change materially in the second half of 2011.

"We're in an environment where prices are going up daily and sometimes hourly," said Karayannopoulos. "In this environment you've got to sit back, take a deep breath and just wait for reason to return."

Neo Material reported a higher fourth-quarter profit on Thursday, as rising demand and prices for rare earth materials boosted revenue for both its magnetic products and materials divisions. [ID:nL3E7EA2VW]

In response to a question about listing in New York, Karayannopoulos said that while the company had considered a secondary listing on various exchanges, it was not a priority.

He also noted that he had not yet heard of any issues from Japanese customers over the 8.9 magnitude earthquake that struck on Friday.

Neo Material Shares were down 4.48 percent on Friday at C$8.32 on the Toronto Stock Exchange.

($1=$0.98 Canadian) (Reporting by Julie Gordon; editing by Rob Wilson)

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