Yes, what’s good for the goose is good for the gander. You don’t need to be a shareholder of Exxon to appreciate the good fortune of increased gas prices. As prices increase some outside, but related, industries also prosper.
Let’s go back to good ‘ol for the second oil crisis of the ’70s. During this time and the ensuing years the gas guzzlers disappeared and in its place were small, gas efficient, vehicles. Yes, Japan was at the beginning of taking over the auto industry where a docile and bureaucratic US auto industry was still in dis-belief and auto chiefs were literally acting out on “The Emperor’s New Clothes”. So the small car companies prospered and the little cars that were scoffed at earlier were now being used as bragging materials at PTA meetings and neighborhood cookouts. Even as the prices went up the alternatives became more appealing to businesses and consumers alike.
As gas goes up this time around we are seeing more on hybrid, electric, and fuel efficient vehicles previously ignored by the marketplace. As oil is consumed more than just by vehicles you will also see the solar energy, coal, and other alternatives to oil creep up again and profit. As the public changes it’s habits and perceptions the “new” markets may make the “old” markets obsolete.
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.
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).
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.