SHANGHAI, Jun 17 (SMM) - The spot prices of rare earth products rose a whole in January and February 2022, with prices rising sharply in February. Among them, the prices of PrNd oxide and terbium oxide rose the most. 

In January, the monthly average price of PrNd oxide and terbium oxide climbed 6.9% and 13.5% MoM respectively. Magnetic material manufacturers constantly lowered their in-plant stocks in January before the Chinese Spring Festival, and restocked few rare earth metals. As such, the prices of rare earth oxide rose only slightly. 

The supply of rare earths tightened in February, especially middle and heavy rare earths. In February, domestic production of PrNd oxide fell 2.5% MoM, and the operating rates of separation enterprises dropped slightly. The raw material inventory of magnetic material enterprises was at a low level, and they actively signed long-term orders to secure the supplies. After the Chinese New Year festival, the demand for rare earth oxides and metal increased, significantly animating the trading market, when the prices of spot rate earths also rose steeply. The monthly average price of PrNd oxide and terbium oxide surged 16.8% and 17% MoM respectively in February.

The transaction prices of PrNd oxide and terbium oxide rose to a high of 1.11 million yuan/mt and 15.4 million yuan/mt respectively, which were too high for downstream magnetic material enterprises with heavy financial pressure. Since rare earth permanent magnets account for nearly 50% of the cost of motors in some high-end downstream fields, significantly rising rare earth prices were especially unacceptable for players in these sectors. 

Affected by the pandemic outbreak in the Yangtze River Delta region in March, the operating rates of terminal factories such as new energy vehicles and two-wheeled electric vehicles slumped, and the orders received by motor companies and magnetic material companies contracted, resulted in poor demand for spot rare earths. On the other hand, the supply of spot rare earth increased slightly in March, with output of PrNd oxide up 9% MoM. 

In addition, the Rare Earth Regulation Office communicated with key market players regarding the prices of rare earth products at the beginning of March, demanding that they shall not participate in market speculation. In this scenario, the market turned pessimistic, and traders sold off one after another. 

Rare earth products prices fell amid weakening fundamentals and regulation on the policy end. The monthly average price of PrNd oxide and terbium oxide both dropped 2.4% MoM in March.

The supply of rare earths continued to tighten in the second quarter. The monthly domestic output of PrNd oxide dropped 3% and 1.2% MoM respectively in April and May, and the shortage was more outstanding with regard to the supply of middle and heavy rare earth as well as scrap. Taking the rare earth supply structure in 2021 as an example, the domestically mined middle and heavy rare earth ore, imported middle and heavy rare earth ore, and NdFeB scrap supported a total of 100,000 mt of rare earth oxides output, accounting for 33% of the total output.

Although the rare earth mining kick-off ceremony of China Rare Earth Group was successfully held at the end of May, the mining of middle and heavy rare earth ores failed to yield output in the second quarter. The main source of imported middle and heavy rare earths is Myanmar, which relies heavily on the provision of auxiliary materials from China.

At the end of April, the domestic auxiliary materials were successfully exported to Myanmar. Due to the isolation and disinfection process during customs clearance, the delivery of auxiliary materials were delayed, which deferred the mining activities in Myanmar. This, coupled with the local rainy season, will keep China’s imports of middle and heavy rare earths in the second quarter at a low level. 

Due to the lack of raw ore, a ion ore separation enterprise affiliated to a large rare earth group in the south turned to monazite chloride flake for separation and smelting. And more middle and heavy rare earth ore separation companies in Jiangxi and Inner Mongolia were shut down. At the same time, the scrap output of magnetic material enterprises also decreased, and the prices of scrap continued to rise with PrNd scrap prices being as high as 940,000 yuan/mt. Most scrap recyclers suffered losses, and would maintain the operating rates at a low level. 

The prices of mainstream rare earth products rebounded in April and May with the combination of tightening supply, enhancing cost support and production resumption. In May, the monthly average prices of PrNd oxide and terbium oxide were rose 7.7% and 8.2% MoM respectively.

At present, from the perspective of terminal demand, the demand for downstream inverter air conditioners is relatively good, and the orders for wind turbine are stable. Although the monthly sales of new energy vehicles in the first and second quarters fell slightly month-on-month, the demand in the second half of the year is expected to be optimistic with policy support like purchase tax reduction. Rare earth prices are expected to be firm in the second half of 2022.