Difficulties in raw material procurement, weak downstream demand, medium-heavy rare earth production down MoM in May [SMM analysis]

SMM May 31 report: In May 2025, China's production of medium-heavy rare earth oxides saw a significant QoQ decline. The most critical reason for this situation was the simultaneous shortage of ion-adsorption ore from Southeast Asia and NdFeB scrap. This shortage had a direct impact on the operating rates of separation plants and scrap recycling enterprises, leading to a significant reduction in their oxide production.

Firstly, from the perspective of ion-adsorption ore in Southeast Asia, due to the continuous sluggishness of market prices, suppliers in regions such as Myanmar generally adopted a wait-and-see attitude and were unwilling to sell their ion-adsorption ore at this time. This mindset led to a substantial decrease in the circulation of ion-adsorption ore in the market, which in turn made it more difficult for separation plants to procure raw materials. At the same time, the implementation of export control policies also suppressed, to a certain extent, downstream demand for medium-heavy rare earth raw materials. Additionally, the delay in issuing mining quotas made separation plants more cautious in procuring ion-adsorption ore, unwilling to readily accept high-priced ore to avoid increasing their operational risks.

Secondly, the shortage of NdFeB scrap is also not to be overlooked. The export control policies not only affected the market for ion-adsorption ore but also had a significant impact on magnetic material enterprises. These enterprises had to face production cuts due to the influence of the export control policies. The direct consequence of the production cuts was a reduction in the generation of scrap. Due to the shortage of raw materials, the production of rare earth oxides by scrap recycling enterprises also showed a significant downward trend. Under the combined effects of the above situations, this ultimately led to a QoQ decline in China's production of medium-heavy rare earth oxides.

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