[minutes] what is the trend of rare earth prices rising and falling in the second half of the year?

SMM6, March 22: at the online live conference hosted by SMM, SMM analyst Hou Jinchen delivered a keynote speech on the review of the rare earth market situation in the first half of 2021 and the analysis and forecast of the second half of 2021. The meeting mainly reviewed the rare earth market in the first half of the year, as well as the progress of overseas rare earth mining projects, and finally returned to the market, and carried out market analysis and forecast in the second half of the year.

Review of domestic rare Earth Market in the first half of the year

Praseodymium-neodymium oxide has a high drop pressure of 590000.

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In the first quarter of 2021, supported by demand, praseodymium and neodymium oxide prices continued the upward trend last year. In the first quarter, the price of praseodymium and neodymium oxide rose from 407000 yuan / ton to around 590000 yuan / ton. In early March, although there was a small reduction, prices rebounded quickly. At the end of March, the price began to show a periodic inflection point, falling all the way to around 480000, the inflection point appeared again, the price began to rebound, and the holder hoped to raise the price, but the demand of the downstream magnetic materials enterprises was not as expected as the off-season was approaching. In just one week, the market quickly turned into the buyer's market. Praseodymium and neodymium oxide prices all the way down, currently hovering around 468000 yuan.

The depth of terbium oxide fell back to the price level in November last year.

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The price of terbium oxide is not strong, it was 7.3 million at the beginning of the year and reached nearly 10 million in March, but by mid-May, it had fallen below the price of the beginning of the year and reached a deep low of 6 million in mid-to-late May. The price is already the same as it was in late November. Although the price rebounded again at the end of May, it also shows that the price elasticity of terbium oxide is greater.

Dysprosium oxide slowly slips down and lingers around 2.3 million for a long time.

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The trend of dysprosium oxide is optimistic, rising all the way from 1.94 million at the beginning of the year to a peak of around 3.08 million, then all the way down to 2.3 million, rising slightly and falling again, and prices are now close to late January levels. In view of the high irreplaceability of dysprosium oxide and more market supply than terbium oxide, the price elasticity of dysprosium oxide is smaller than that of terbium oxide.

On the policy side, the big news this year is the announcement of rare earth mining and smelting separation indicators. The first batch of rare earth targets in 2021 will increase by 18000 tons of REO, over 2020, of which light rare earth ores will increase by 16085 tons REO, and medium and heavy rare earth ion ores by 1915 tons of REO. According to the distribution calculation, the first batch of rare earths in China will add about 2900 tons of praseodymium and neodymium oxide, nearly 70 tons of dysprosium oxide and 12 tons of terbium oxide. On January 15 this year, the Ministry of Industry and Information Technology issued the regulations on the Administration of rare Earths (draft for soliciting opinions), clearly pointing out that no unit or individual may invest in the construction of rare earth mining and rare earth smelting separation projects without approval, and has established a general tone for the follow-up domestic rare earth mining and separation, that is, to continue to implement total quantity target control. In the future, in order to match the fast-growing downstream demand, medium and heavy rare earths will continue to be strictly controlled, and light rare earth targets will be released in an orderly manner.

From the changes of the indicators, it can be inferred that the domestic supply of rare earth raw materials is gradually increasing. At the same time, judging from the annual changes in the import of rare earth minerals, China's demand for overseas rare earth raw materials is also increasing year by year. In recent years, with the massive exploitation of rare earth mines in Myanmar, the supply of high-quality resources continues to decrease, and the reduction of mine resources makes miners begin to choose other areas and have to face the influence of factors such as grade decline. Myanmar's mineral production may gradually decline.

Progress of overseas rare earth mining projects

The global distribution of rare earth resources is relatively concentrated. China's rare earth reserves accounted for 37% in 2020.

From the perspective of resource-side distribution, according to USGS data, the total amount of rare earth resources in the world in 2020 was 120 million tons, of which China accounted for 44 million tons, accounting for 37 percent; Vietnam and Brazil both had proven reserves of 22 million tons, accounting for 18 percent; Russia's proven reserves were 12 million tons, accounting for 10 percent; and India's proven reserves were 6.9 million tons, accounting for about 6 percent. The distribution of resources and reserves is relatively concentrated, with CR5 accounting for 90%.

China's share of global rare earth mineral production of 240000 tons declined slightly in 2020

In terms of production distribution, the global rare earth mineral output in 2020 was 240000 tons, of which China was the largest rare earth producer, accounting for 58%, down slightly from 63% in 2019. The United States, Myanmar and Australia accounted for 16%, 12% and 7% respectively, while the United States and Myanmar accounted for an increase compared with 2019.

From the perspective of the regional distribution of overseas rare earth resources projects, the distribution is more concentrated in Australia, Greenland, the United States and other regions. Among them, Australia Lynas is the first overseas rare earth company to achieve commercial production, and it is also the largest supplier of rare earth smelting separation products in overseas markets. In addition, Brazil, Africa, Burundi, Russia, Sweden and other countries also have a small number of rare earth resources projects. At present, Lynas is the only overseas rare earth enterprise that is independent of China's rare earth industrial system and achieves large-scale mass production. Most of the other projects are in the early stage and lack of project funds, so it is difficult to see the increase in the short term.

In addition, most of the overseas rare earth mines are light rare earths and few heavy rare earths.

Lynas's Mount Weld mine, a rare earth, niobium, tantalum and phosphorus associated deposit, was put into production in 2013 with an initial capacity of 11000 tons of (REO) / year and then increased to 25000 tons of (REO) / year. The current capacity utilization is about 75%. There are no plans to continue to expand production at the mine end in the short term, and the capacity increment is relatively limited.

In terms of mines in the United States, Mountain Pass is the main mine currently produced in the United States, with a total amount of about 21.1 million tons of, (MP Materials Corp) ore and reserves of 1.5 million tons. The average grade of REO, is 7.06%. It began to resume production in January 2018, and the designed annual production capacity of REO, is mainly sold to China through Shenghe resources. at present, the production capacity has climbed to the full production stage, and there is no short-term mine expansion plan.

In terms of heavy rare earth resources, the heavy rare earth projects currently under development include Northern Minerals and Greenland Minerals. Northern Minerals is currently one of the few producers outside China that has supplied medium and heavy rare earth concentrates in small quantities. Its Browns Range project is a high-grade terbium-based heavy rare earth phosphate yttrium ore, the project is located in Western Australia, reserves in the, Browns Range project, dysprosium oxide reserves of about 2294 tons REO, terbium oxide reserves of about 335 tons of REO, the total amount of heavy rare earth resources is relatively limited. In addition, Browns Range heavy rare earth projects still face problems such as project financing and technical barriers to large-scale production processes in the future, which can not have a great impact on the global supply pattern of medium and heavy rare earths in the short term.

Greenland Minerals's Kvanefjeld rare earth project is located in Greenland, which is mainly composed of three major mining areas. Specifically, according to the company's announcement, the potential resource scale of the Kvanefjeld project is huge, and it is the largest rare earth resource found in China before it is used for external purposes. Its total resource is about 11.14 million tons, and the average oxide grade of REO, is about 1.10%. In the short term, the Kvanefjeld project is still a long way from industrial production, but due to its huge amount of resources and the further development progress of the project, the feasibility study report of the project has been completed and further design optimization is being carried out with the support of Shenghe resources. the progress is worthy of close attention.

In the medium to long term, China and Myanmar will remain the world's unique supplier of medium and heavy rare earth resources. However, it can be judged that the increase in global rare earths in the future will mainly come from China, the United States, Australia and other countries.

Analysis and forecast of rare earth market in the second half of the year

The export volume of rare earth permanent magnets is rising year by year. NdFeB enterprises are enthusiastic about expanding production.

From the export data of rare earth permanent magnets (35981 tons), the global demand for rare earth permanent magnets is gradually increasing. The downstream market demand of rare earth permanent magnet materials shows a good development trend as a whole. At present, wind power is the downstream field with the largest consumption of NdFeB magnetic materials, and new energy vehicles are the second largest application field of rare earth magnetic materials. Policy increase, superimposed downstream demand pull, NdFeB field enterprises in the field of capacity expansion enthusiasm. Zhenghai Magnetic Materials, Jinli permanent Magnet, Dadixiong, Guangsheng Nonferrous, Xiamen Tungsten Industry, Jintian Copper and other projects have new or expanded production of NdFeB.

In terms of technological improvement, the grain boundary penetration technology developed by Jinli permanent magnet can reduce the addition of dysprosium and terbium by 50%, 80%, and reduce the cost of raw materials, thus making the products more cost-effective. The traditional element addition method is added in the melting process, that is, dysprosium and terbium are melted together with neodymium, iron, boron and other elements. In the final magnet, dysprosium and terbium are distributed in the grain boundary and in the main phase of the grain. The grain boundary infiltration technology developed by Jinli permanent magnet uses a special process to make dysprosium and terbium exist only in the grain boundary without entering the grain, which is equivalent to the same amount of raw materials, and now more NdFeB can be produced. Compared with the continuous expansion of NdFeB industry, the reduction brought about by this part of technological improvement is expected to have little impact on the supply and demand pattern of medium and heavy rare earths. In the long run, the demand of rare earth permanent magnets for rare earth raw materials will also increase rapidly in the future, which will play a strong supporting role in the price of rare earth raw materials.

The output of new energy vehicles maintains a high level of offshore wind power projects in May.

In the short term, although in the second quarter, the overall situation of China's auto market is not very optimistic. China's auto production and sales reached 2.04 million and 2.128 million respectively in May, down 8.7 per cent and 5.5 per cent from the previous month and 6.8 per cent and 3.1 per cent from a year earlier, according to the China Automobile Association. However, new energy vehicles are still popular, with production and sales of 217000 vehicles, an increase of 1.5 times and 1.6 times respectively over the same period last year. Shi Jianhua, deputy secretary general of the China Association of Automobile Manufacturers, said that the chip shortage had a great impact on the car market in the second quarter, which will be alleviated to a certain extent at the end of the third quarter and in the fourth quarter. The impact of the chip problem on automobile production is still continuing, while the sharp rise in the price of raw materials also has an impact on the industrial chain.

In addition, in recent years, as the construction technology of onshore wind power in China has become increasingly mature, coupled with the broader offshore wind power resources, the national wind power development policy is gradually inclined to offshore power generation. During the period from the Twelfth five-year Plan to the 14th five-year Plan, with the implementation of relevant policies, offshore wind power in China has developed rapidly, and offshore wind power projects in coastal provinces and cities have landed rapidly.

At present, wind power is the downstream field with the largest consumption of NdFeB magnetic materials, and new energy vehicles are the second largest application field of rare earth magnetic materials. From these two areas, the current development situation is still relatively optimistic. Due to the overall strength of domestic market segments, the sales of new energy passenger cars are expected to rise to 2.4 million this year.

According to the Zheshang Securities Research report, according to data from the State Energy Administration, due to rush installation, the number of new wind power installations in China last year was 71.7 GW, an increase of 176% over the same period last year, which is expected to drive NdFeB sales of 22000 tons.

Zhongtai Securities reported that although NdFeB magnets consume less in new energy vehicles, only 3 kg/, which is about 1/10 of lithium carbonate. However, the explosive growth of new energy vehicles is an important factor driving the rise in demand for rare earth magnetic materials.

The rare earth market is expected to rise in the second half of the year.

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From upstream supply to downstream demand, the overlay policy guidance can be determined that in the long run, the rare earth market, especially the medium and heavy rare earth market, can be expected in the future.

In the short term, with the arrival of this round of rare earth market decline, many enterprises are facing the pressure of cash flow, superimposed June and July belong to the off-season of the magnetic materials industry, downstream procurement is generally more cautious. Similarly, upstream enterprises are also facing cash flow pressure, some enterprises follow the market, low-cost shipments, continue to suppress market confidence. The price trend chart of the three oxides of praseodymium, neodymium, terbium and dysprosium from the beginning of 2021 can be seen that there is a high probability that the market will rise after the persistent horizontal market. At present, this wave of horizontal market has been going on for a long time, and it is expected that once the price rises, it will usher in a sustained rising market. Ignoring short-term small market fluctuations, the next wave is expected to occur in August-September. At that time, magnetic companies needed to prepare for next year's orders, and with the end of the overseas summer break, overseas demand is expected to continue to recover in the absence of black swans. In view of the large elasticity of terbium, SMM expects terbium oxide to reach 700-8 million / ton during the period from August to September; dysprosium is relatively small and is expected to reach 250-2.6 million / ton in the second half of the year; praseodymium and neodymium are expected to sprint 500000 / ton again.