MTL Index

Rare Earths. Price increase confirmed.

Are rare earths once again becoming rare ? February saw confirmation of the trend begun at the end of last year - the price of rare earths is going up. In January the price index had already increased by 4.3%. In February we saw an additional rise of  8.3%. This confirmation indicates that the market is indeed on the way to recovery.

But demand does not seem to be spread evenly. According to the Chinese Ministry of Commerce, exports of light rare earths fell sharply, with a plunge of 64% compared to the same period in 2014. So what could be more natural than that the production of rare earths outside China, consisting principally of light rare earths such as lanthanum and cerium, should have sharply increased ? In contrast, industry players literally rushed to snap up medium and heavy rare earths. Now that quotas no longer exist, exports have increased by 324%. However, it should be emphasized that in both cases, the value of exports escalated by 11% for light rare earths, and by 332% for medium and heavy rare earths.  More importantly still, it's not just the market reforms that explain this rise.  

International demand takes over
Peking is of course continuing the reforms begun in 2014. In February, the rare earth capital, Baotou, launched yet another campaign against illegal mining, as part of the policy conducted by the central government. But as Jon Hykawy, President and Director of  Stormcrow Capital puts it, the fact that "for the first time since the first quarter of  2011, the price of rare earths used in the magnet sector has seen an increase in the last 3 months, it's an indication that the demand for magnets is showing strong growth outside of China."  A Chinese analyst points in particular to the industrial recovery in the United States as an important factor. Pressure on certain rare earths may even appear rapidly, given the limited size of the market. One Chinese expert mentions that the Chinese production of dysprosium oxide in 2011 did not really reflect consumption in the Chinese magnet sector.

It is perhaps this risk of shortage that explains why the Chinese State Bureau of Material Reserve (SBMR) launched a new round of stock building after the Chinese New Year.  For although external demand is currently enabling the market to recover, China has the firm intention of retaining it's rare earths for its local producers in the long-term. Prudent, the long-standing player in permanent magnets, the Japanese company Hitachi, has just formed a joint-venture with the Chinese magnet producer Beijing Zhong Ke San Huan Hi-Tech.