In a briefing paper written to explain the situation, GE warns:

“We will do our best to manage these costs where we can, but rises on a similar scale to those seen in recent months will mean further significant price adjustments may be unavoidable.”

The brief paper provides a very general summary of the current rare earth market and describes GE’s current attempts to reduce the impact of high rare earth prices. I now strongly suspect that more and more industrial companies and manufacturers will flag rare earth prices as a potential and/or growing issue. Moreover, these warnings will keep rare earth prices in the foreground of the market’s “thinking” and potentially keep pushing rare earth stocks higher.

Disclosure: author is long several rare earth stocks, including MCP. Also long GE

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“We remain cautious about the potential for increases in material and component costs, and we will be as vigilant as possible in our pricing strategies to protect our margins and market position. Notwithstanding efforts to recoup higher costs, we anticipate pricing will continue to be competitive.”

AYI will be facing an unfavorable squeeze on pricing. The outcome will likely depend heavily on whether its competitors are willing to sacrifice margins to try to maintain market share.

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