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Reasons behind Sluggishness in Chinese Rare Earth Industry
Mar 22,2013 17:17CST
industry news
Source:SMM
Based on current market movement, the industry is unlikely to reverse weak momentum in the short term, and will lucrative profits shall no longer return this year.

SHANGHAI, Mar. 22 (SMM) – As for rare earth producers, the bad days seem to have come already. According to 2012 performance report from listed companies, the rare earth industry is experiencing tough time.

According to performance report from Inner Mongolia Baotou Steel Rare-Earth Hi-Tech from January 1st, 2012 to December 31st, 2012, net profit attributable to share holders of listed company has fallen from 50% to 60%.

Actually, Inner Mongolia Baotou Steel Rare-Earth Hi-Tech is not the only company experiencing tough time in the industry. According to performance report from Guangdong Rising Nonferrous Metals Group from January 1st 2012 to December 31st, 2012, net profit attributable to share holders of listed company rell by 60-80%.

According to Wangjian, Senior Wealth Management of Changjiang Securities, said that Chinese rare earth exploiters’ dumping of rare earth by massive mining at the expensive of environmental damage is the major reason behind profit contraction at China’s rare earth industry. Besides, the soft demand in China is also a major reason behind profit contraction at Chinese rare earth producers.

Not only large companies reported profit decline, small companies also have very harsh time. According to Yuan Zhibin, researcher from CIC, administrative means adopted by government forced many companies to exit market, the remaining companies also feel the pinch. The overcapacity and excessive exploration not only resulted in steady decline in rare earth prices. After Chinese government restricted exports of rare earth, domestic rare earth producers lose overseas market, which resulted in high inventories and big losses for them.

According to Lin Liangmin, researcher of China Webmaster, overcapacity and soft downstream demand is the major reason behind sharp contraction of profit at rare earth sector.

The soft downstream demand only refers to domestic market, while overseas demand is still brisk. However, China’s excessive exploration of rare earth made government to interfere in this industry by restricting exports. Given that rare earth demand in China is limited, the whole industry fall into recession.

Besides, production of rare earth from the US, Vietnamese, and Mongolia also exert impact on China’s rare earth producers.

Based on current market movement, the industry is unlikely to reverse weak momentum in the short term, and will lucrative profits shall no longer return this year.

Edited by SMM

China rare earth industry
China rare earth

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