OREANDA-NEWS. October 28, 2010. According to Tiit Vahi, one of the owners of the Silmet group of Estonia that has emerged as the only producer of rare earth metals in the world outside China, the prices of rare earth metals on the world market will remain high for a couple of years to come.

Nearly 95 percent of all the world's rare earth metals are produced in China and the rest at Silmet, a company based in the northeast Estonian town Sillamae.

Vahi told Eesti Paevaleht in an interview that Silmet's situation is unique in that the Chinese no longer want to supply rare earth metals to parties outside China. The plants in California and Australia that were closed because of cheap supply from China can be opened again only in about four years, said Vahi, former prime minister of Estonia.

"With their cheap output the Chinese achieved a monopoly standing, after which they introduced export quotas and restrictions, and since rare earth metals are needed in high tech production, prices skyrocketed. That happened at the end of last year and at the beginning of this year. Silmet's position became interesting. There are stocks also elsewhere in the world, but plants outside China have been closed, the competence of processing has been lost. It takes from three to four years to re-launch a plant," Vahi explained.

"Right now Silmet is faced with a big challenge, because it has happened that 100 percent of the rare earth metals extracted outside of China come from us. We're now discussing among ourselves and with partners how to make use of this unique situation," said Vahi.

Silmet can increase its output severalfold shortly because the production line set up in the 1990s allows to do it without major additional investments.

"I think that prices will remain high for a couple of years. Then new plants will go into work and China will ease export quotas, and a new cycle will begin," Vahi said. "China will probably change its export policy to put the brakes on the opening of new plants," he added.

Silmet Group hired 30-40 more people during the crisis. "Our thinking was that after the crisis life will get better again and we'll need specialists again. We pulled together extras and bonuses, but didn't send people to the street," Vahi said.

Sales by Silmet dropped to 382 million kroons (EUR 24.4 mln) last year from 489 million kroons in 2008.

Rare earth elements, or rare earth metals, are a collection of seventeen chemical elements in the periodic table that are used in the manufacture of a variety of products ranging from high-temperature superconductors, lasers, fluorescent lamps and x-ray machines to ceramic capacitors and self-cleaning ovens.