SHANGHAI, May 4 (SMM) – Rare earth prices in China have rebounded and the industry is showing signs of recovery thanks to a series of positive factors, China Securities reported.
The recovery is driven by further concentration of rare earth mining quota, crackdowns on illegal mining, as well as growing downstream demand.
Rare Earth Prices to Extend Bull Run
Mining quota, state stockpiling and illegal mining crackdowns have long been three important steps for reducing capacity in rare earth industry. In particular, these three steps have been upgraded since H2 2016.
First, mining quota is further concentrated. On April 13, the MIIT announced this year’s first batch of rare earth mining quota at around 100,000 tonnes. Quotas in some provinces are allocated exclusively to corresponding six large rare earth groups.
Second, stockpiling by the State Reserve Bureau (SRB) features smaller quantity but higher frequency. The SRB has carried out three rounds of stockpiling, namely December 2016, January 2017, March 2017, totaling over 6,400 tonnes. The SRB plans to buy 15,550 tonnes of rare earth this year, but only 4,470 tonnes have been bought, meaning another 11,080 tonnes will be purchased for the rest of the year.
Third, goal for crackdowns on illegal mining has become clearer. China carried out a targeted campaign for cracking down on illegal rare earth mining nationwide from December 2016 to April 2017. The goals are breaking illegal rare earth industry chain and strict control over output of rare earth separated and smelted products. Meanwhile, six large rare earth groups are not allowed to engage in illegal mining and will push for establishment of rare earth tracking system.
Favorable policies, together with strong demand, have fueled a rally in rare earth prices. So far, prices for most rare earth products have gained 10%-20% compared with the bottom prices in 2016.
Most market players are optimistic over rare earth price outlook since the second quarter is a traditional peak-demand season. With boom in NdFeB market, rare earth prices look set to stay at highs in Q2.
Global NdFeB output grew at an annual average rate of 9.2% during 2010-2015 and is expected to reach 170,000-180,000 tonnes in 2017.
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