SMM: Rare Earth Prices Trending up in 2021 amid Tight Supply and Heightened demand

SHANGHAI, Sep 24 (SMM) - The prices of mainstream rare earth products are expected to be strongly supported by the downstream demand in 2022, with prices of mainstream rare earth oxides such as praseodymium oxide, terbium oxide and dysprosium oxide steadily moving upwards, according to SMM. Specifically speaking, China's new energy vehicle production is expected to reach 2.78 million units in 2021 and 14.22 million units by 2030, with a CAGR of 20% during 2021E-2030E. The development of elevators, air conditioners and wind power generation will also sustain its momentum.

China rare earth permanent magnet market

Rare earth permanent magnet materials are widely used in many fields like automobiles, consumer electronics, home appliances and industrial robots. For the upstream end, the direct rare earth raw materials for permanent magnets are rare earth metals, which are derived from smelted rare earth oxides, while rare earth ore is the final raw material.

In recent years, China's overall quotas for rare earth mining, smelting and separation have shown an upward trend in a bid to meet stronger downstream demand for rare earth. The increase in the quotas for light rare earth mining is more noticeable. In 2021, the first batch of quotas for rare earth mining increased by 27% year-on-year to 84,000 mt, while the quotas for the mining of medium and heavy rare earth ore increased by only 20% year-on-year. SMM predicts that the domestic quotas for rare earth ore mining in 2021 will increase 20% year-on-year to 168,000 mt.

In addition to the domestic supply, a large volume of rare earth ore is derived from imported cargoes. In recent years, China's rare earth ore imports have shown an overall upward trend. The key rare earth ore products are generally divided into two categories, including light rare earth ore as well as medium and heavy rare earth ore. SMM expects China’s rare earth ore imports to rise 11% on the year to 125,000 mt in 2021. The rare earth metal ore shown in the picture is a typical light rare earth ore, almost all of which is imported from the United States. In 2020, 99% of China's rare earth metal ores was imported from the United States. In the first half of 2021, China's rare earth ore imports fell slightly by 6% year-on-year to 35,708 mt.

Mixed rare earth carbonates, unspecified rare earth oxides and rare earth metal compounds are typical medium and heavy rare earth ores, which are mainly imported from Myanmar.

The rare earth ore exports by Myanmar are not optimistic this year due to the disruptions from the pandemic. In the first half of the year, China's imports of mixed rare earth carbonate from Myanmar plunged by 77.5% year-on-year. China’s imports of unspecified rare earth oxides from Myanmar in July and August fell sharply by 53% and 93% year-on-year, respectively, due to the pandemic factor. As such, China’s supply tightness of medium and heavy rare earth ore has intensified. Many rare earth separation plants in the south reported difficulties in purchasing raw materials.

In addition to the shrinking supply of overseas medium and heavy rare earth ores, domestic rare earth separation plants also experienced more output cuts and shutdowns in the second half of the year due to the factors like power rationing, environmental protection inspections and equipment maintenance. Under such a general environment, the prices of didymium oxide hit a new high in the second half of this year, with the average price standing close to 650,000 yuan/mt at one point. And the prices of praseodymium-neodymium alloy were close to 800,000 yuan/mt. The supply of raw materials is tight, and downstream procurement is very cautious, suppressing the liquidity of the entire rare earth market. At present, the prices of didymium oxide still hover at high levels, fluctuating around 600,000 yuan/mt. And the prices of praseodymium-neodymium alloy hover around 740,000 yuan/mt.

The acceptance of the current prices is low by rare earth permanent magnet enterprises, which are the largest downstream enterprises of rare earth. This prevented the price gains from being passed onto the end-user field.

China rare earth permanent magnet market overview

China's rare earth permanent magnet industry is mainly concentrated in Inner Mongolia, Shanxi, Shandong, Jiangxi, Zhejiang and Shaanxi, among which Ningbo, Zhejiang boasts the largest share of rare earth magnetic materials.

Ningbo Jintian Copper, Zhenghai Magnetic Materials, Earth Panda, Hengdian Group DMEGC Magnetics, Xiamen Tungsten, etc. have successively carried out new expansion projects, and domestic rare earth permanent magnet output has also increased year by year. The domestic permanent magnet output is expected to increase 7% to 210,000 mt.

About 95% of the rare earth permanent magnets are sintered NdFeB. In recent years, the proportion of China's high-performance sintered NdFeB in the total NdFeB increased slightly to about 30-40%. Although high-performance sintered NdFeB enterprises have ample orders, their overall share is relatively small, yet medium and low-end magnetic materials enterprises have relatively low financial strength and are more sensitive to price fluctuations, which restrained the rise of rare earth prices to a certain extent. This is the main reason why the leading rare earth permanent magnet companies have ample orders, but the price of raw materials has not risen.

China’s exports of rare earth permanent magnets include four categories. The exports of permanent magnets account for the largest proportion and are also the most important products. The exports of permanent magnets accounted for 88% of the total in 2020.

The exports of China's rare earth permanent magnets are far greater than the imports. With the increase in downstream demand for rare earth permanent magnets, overseas markets have become more dependent on China's rare earth products. The exports have also increased year by year. The exports of rare earth permanent magnets are expected to increase by 11% year-on-year to 40,000 mt;

Germany, the United States, South Korea, Vietnam and Thailand are the main trading partners.

Analysis of China's rare earth permanent magnets downstream market

High-performance rare earth permanent magnets have been popular among automobiles, inverter air conditioners, energy-saving elevators, and industrial robots in recent years. More companies are expected to transform into the high-performance field in the future.

Auto sector

China's NEVs output continued to grow at a high rate in August, with monthly output exceeding 300,000 units for the first time, according to data released by the China Association of Automobile Manufacturers. China's NEVs output is expected to increase by 104% year-on-year to 2.78 million units, and the corresponding demand for high-performance NdFeB to increase to 9,043 mt.

The NEVs output is likely to stand at 14.22 million units by 2030. From 2021 E to 2030 E, the compound annual growth rate of the domestic NEVs output is expected to be 20%. The NEVs output totalled 1.37 million units in 2020.

China’s traditional vehicle output is expected to decline slightly by 2% to 25.138 million units in 2021 amid less popularity and the Covid-19 pandemic. Its demand for high-performance NdFeB is expected to be 6,963 mt, down 0.5% year-on-year.

Industrial robot

The industrial robot industry has been growing across the world in recent years, which has attracted much attention. China's industrial robot industry will embrace the huge development opportunities amid the intensified population ageing and higher labour costs. SMM expects China's industrial robot output to increase by 46% to 347,300 units in 2021, of which the demand for high-performance NdFeB will rise to 8,682 mt.

Elevator

Elevators have become the standard equipment in newly-built houses with the continuous urbanisation. SMM believes that the future development prospects of the elevator industry are broad. China's elevator output in 2021 is expected to increase by 8.7% year on year to 1.39 million units, and the corresponding demand for high-performance sintered NdFeB will reach 5,186 mt.

Inverter air conditioner

The output of inverter air conditioner has increased rapidly in the home appliance sector due to the energy conservation and emission reduction. The output of inverter air conditioner in China is expected to increase by 62% year on year to 134.72 million units in 2021, and the corresponding demand for high-performance NdFeB will reach 16,166 mt.

Wind power

Unlike the rapid market penetration of inverter air conditioners, the wind power market may shrink this year. In 2021, China’s wind power prices start to stand basically flat over the coal power. There’s basically no crash schedule in the wind power projects in 2021, except for a small amount of offshore wind power installation with government subsidies. China's newly installed capacity of wind power is expected to be 51GW in 2021, a slight decline of 3.8% year on year. The corresponding demand for NdFeB will drop from 12,892 mt to 12,406 mt.

Consumer electronics

The consumer electronics sector is usually overlooked. It mainly includes mobile phones, mechanical hard drives, personal computers, televisions, etc. The output of mechanical hard disks has declined year by year since 2017 due to the rapid development of solid hard disks. The output of mobile phones also declined in recent years amid the lower replacement frequency. However, the overall output of TV sets and personal computers is rising. It is expected that the demand for NdFeB in China's consumer electronics sector will increase by 17.4% year on year to 4,961 mt in 2021.

Price forecast of China's rare earth permanent magnet raw material

Since the beginning of 2021, the prices of mainstream rare earth products such as praseodymium neodymium, terbium, and dysprosium have hit a 10-year high. However, it becomes more difficult for the price increase to be smoothly transmitted to the downstream products, and the transactions have gradually fallen into a stalemate. Some small and medium-sized magnetic material companies have reduced production.

In the second half of this year, the power rationing, environmental inspections, and Myanmar's customs closure have led to the increasingly tighter supply of rare earths. Therefore, the rare earth prices still have strong support despite the cautious downstream purchase. The consumption continuously improves in end sectors such as as air conditioners, automobiles, and energy-saving elevators, and the demand has exceeded the supply, which will push up the rare earth prices.

SMM expects the prices of neodymium praseodymium oxide to reach 700,000 yuan/mt, the prices of terbium oxide to reach 8-10 million yuan/mt, and the prices of dysprosium oxide to reach 3 million yuan/mt.

The current SMM rare earth prices cover the up, middle, and downstream products of the rare earth industry chain, including the rare earth ore, rare earth salts, rare earth oxides, rare earth metals, and NdFeB blanks. SMM rare earth prices are widely used in the rare earth industry.