SHANGHAI, Apr. 2 (SMM) – Capacity utilization rate at the rare earth industry fell short of 40%. According to China Nonferrous Metals Industry Association President Chen Quanxun, rare earth overcapacity is very severe, with capacity utilization rate below 40%.
Chen Quanxun said capacity of aluminum, industrial silicon and rare earth has been in oversupply. The capacity utilization rate of industrial silicon was less than 30%, with capacity utilization rate of aluminum reaching 80%.
"Capacity surplus of industrial silicon and rare earth is very significant." Said Chen Quanxun, "The most effective measure to ease capacity surplus is to expand utilization fields."
But China is weak in rare earth utilization, such as rare earth permanent magnetic material, fluorescent material and catalyst. High-end rare earth permanent magnetic materials are mainly produced by Japan, while only several enterprises including Zhongke Sanhuan, Ningbo Yunsheng and Advanced Technology & Materials Co., Ltd (AT&M) produce high-end rare earth permanent magnetic materials in China.
Many domestic enterprises mainly engage in low-end ferrite magnets production, and fierce market competition and high rare earth costs forced them to reduce rare earth utilization or even suspend production. In this context, the capacity utilization rate of rare earth fell short of 40%.
Annual earnings of rare earth enterprises in 2012 slid across the board. Rare earth exploration and separation are most profitable of the industry chain. Rare earth prices dropped sharply in 2012, and upstream profits were also down. Inner Mongolia Baotou Steel Rare-earth (Group) Hi-tech Company ordered its upstream companies in north China to suspend production for three months. According to the company's annual report, net profits in 2012 were RMB 1.51 billion, down 56% from RMB 3.478 billion in 2011. The company reported with high inventories at hand, their cash flows were much lower than annual net profits. (Edited by SMM)