SHANGHAI, Jan 7 (SMM) – In 2018, frequent environmental inspections and crackdowns on illegal mining affected rare earth industry. Further cuts in electric-vehicle subsidies and US-China trade disputes lowered demand for rare earth materials in the key downstream sector of permanent magnets. This limited upward momentum in rare earth prices.
Tight supplies of ore resources buoyed prices of raw materials above rare earth oxide, and this supported prices of rare earth. China’s limits on exploration limited supplies of mineral resources in 2018, despite an influx of imports. In the first three quarters, prices of rare earth consolidated at lows, with praseodymium-neodymium oxide trading at 320,000-350,000 yuan/mt.
For 2019, we retain an optimistic outlook on prices of rare earth as the market for new materials expands further. Uncertainties around imports would also tighten supplies. Even as macroeconomic factors weighed on exports in some downstream sectors in 2018, more supportive policies are expected to underpin demand and prices.
Global rare earth ore output to reach 190,000 mt in 2018
Global production of rare earth ore grew from 2014, and is likely to reach 190,000 mt in 2018, according to open data. Among this, China will account for 120,000 mt, Australia will account for over 20,000 mt, and Myanmar will account for some 20,000 mt. In the US, the Mountain Pass rare earth mine in California is estimated to have produced 20,000 mt of rare earth ore. In Burundi, Rainbow Rare Earths' newly-commissioned project will contribute some 1,000 mt of production. Output in other countries totalled some 10,000 mt.
Exploration, separation, smelting quotas rise YoY
In 2018, China’s overall limits for rare earth exploration stood at 120,000 mt, and limits for separation and smelting at 115,000 mt, according to the Ministry of Natural Resources (MNR) and the Ministry of Industry and Information Technology (MIIT). Exploration limits were 15,000 mt, or 14.3%, higher than that in 2017. Those for 2018 included 19,150 mt of heavy rare earth (mainly ion-absorbed rare earth deposits), and 100,850 mt of light rare earth.
Analysis of China's rare earth recycling market
Some 80% of China’s rare earth recycling capacity is located in Ganzhou of Jiangxi province, while the rest are spread across Jiangsu province and Baotou in Inner Mongolia. Annual rare earth oxide production of recycled capacity stood at 15,000 mt, with praseodymium-neodymium oxide accounting for over 90%, and dysprosium terbium products taking up the rest. Even as the state promoted recycling, the expansion of rare earth recycling in Jiangxi drove China to ban the commissioning of newly-built recycled capacity in the area. Such restrictions have yet to expand to other regions, SMM learned. We expect domestic capacity for rare earth recycling to change little in 2019.
New materials sector accounts for 70% of downstream demand
While widely used in traditional industries of mechanical metallurgy, glass, ceramics, agriculture, and textile, rare earth materials are also applied in emerging markets, given their exceptional electromagnetic properties. These evolving markets include new materials, electronics, new-energy, and environmental protection.
New materials account for 70% of thedownstream demand for rare earth, with consumption in traditional industries under 30%. In the new materials sector, permanent magnets account for over half of the demand. While downstream sectors of polishing power, hydrogen storage materials maintained stable consumption for rare earth, demand from fluorescent materials declined steadily. We see growth potential in the permanent magnet and catalyst industries.
Green industry to support demand for permanent magnets 2018-2020
SMM expects that in 2018-2020, expanding green industries and a wider application of neodymium iron boron (NdFeB) materials will contribute to a majority of the demand for rare earth permanent magnets.
NdFeB magnet, the most widely used type of rare-earth magnet, is applied in energy conservation and environmental protection fields such as wind power, energy-saving home appliances, electric power steering (EPS), and new-energy vehicles. The magnet is also used to produce electronics such as voice coil motor (VCM) in a hard disk drive, optical disk drives, micro-motors, as well as to produce electroacoustic equipment, magnetic separators, power tools, and magnetic resonance imaging (MRI) in traditional fields. NdFeB magnate contains 30% of praseodymium-neodymium and 2% of dysprosium materials.
Rare earth imports, exports in 2018
In 2018, China's imports of South-east Asian rare earth ore continued to increase. Praseodymium-neodymium products from Australia's Lynas' processing plant in Malaysia were also imported to ease domestic supply tightness.
China is the world's largest producer of rare earth and the biggest supplier to the US. Rare earth metals are widely used in permanent magnets, radars, electronics, petrochemicals and military equipment.
During US-China trade disputes in September, items around rare earth metals, oxides, compounds, and metal-based magnet were removed from a list of $200 billion of Chinese goods that will face fresh US tariffs from September 24.
China restructures industrial chains, cracks down on illegal output
The frequency and duration of China's environmental inspections in the rare earth industry has grown, with stricter reviews on previous rectifications works. Probes before 2016 targeted unlicensed mining, while probes in 2017-2018 targeted smelting, separation, and waste discharge, with treatment of wastewater and waste slag.
In recent years, China came down harder on illegal mining by introducing rare earth special invoices, setting up a blacklist of illegitimate producers and verification process for the origin of supplies. Stricter environmental probes and inspections on tax evasion narrowed profits of unlicensed mining, and reduced illegal output in China, SMM found.
The central government’s anti-corruption efforts also pressured operations of six major domestic producers. In 2014, China began to merge rare earth smelters to establish six groups, as the first step to consolidate resources and to restructure industrial chains.
The six groups, including Northern Rare Earth Group and Aluminum Corp of China, are mostly based in major manufacturing areas such as Inner Mongolia, Jiangxi, Guangdong and Fujian provinces.
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