SMM, July 14: In H1 2026, the secondary oxide market performed strongly, with production surging 144% YoY and up 28% from H2 2025. Notably, the output of secondary Pr-Nd oxide increased significantly, with its share in total Pr-Nd oxide production rising from 31% in H2 2025 to 43.5% in H1 2026. This growth was driven by multiple factors, including policy controls, supply-demand fundamentals, adjustments to industry pricing models, and changes in magnetic material enterprises' formulations.
Q1: Supply-Demand Gap and Pricing Adjustments Push Share to a High of 46%
In Q1 2026, the share of secondary Pr-Nd oxide output reached as high as 46%. On the raw ore side, strict control over quota policies limited new capacity additions; some separation enterprises cut production or halted operations at the beginning of the year, leading to expectations of tighter spot Pr-Nd oxide supply and a continuously rising price center. Recyclers' profit margins improved significantly, expansion projects increased, and the industry's operating rate was generally raised.
Meanwhile, the pricing standard for the rare earth recycling industry was adjusted in early 2026—the scrap pricing yield was raised, and processing fees were lowered slightly, which enhanced the settlement value of the same batch of scrap, boosting scrap suppliers' willingness to sell. Combined with the implementation of magnetic material enterprises' 2025 capacity expansion projects, scrap output increased, and suppliers held relatively ample inventories. Additionally, due to export control policies, magnetic material enterprises reduced the addition of elements such as dysprosium and terbium, leading to a corresponding increase in the Pr-Nd content ratio, which also boosted the Pr-Nd content in scrap. Overall, the supply-demand gap, pricing model adjustments, and the increased Pr-Nd content in scrap together drove the substantial growth in secondary Pr-Nd oxide production.
Q2: Raw Ore Production Resumptions and Tightening Tax Compliance Pull Share Back to 41%
Entering Q2, the share of secondary Pr-Nd oxide output pulled back from 46% to 41%. On one hand, the operating rate of raw ore separation enterprises was raised, boosting raw ore output and diluting the share of secondary Pr-Nd oxide. On the other hand, as overall Pr-Nd oxide supply increased and downstream demand entered the traditional off-season, supply-demand fundamentals improved somewhat. Prices fell from the Q1 average, leading some recyclers to cut production and conduct maintenance, and the industry's operating rate edged down. More critically, tax audits intensified significantly since May, with compliance reviews further tightened in June. Affected by compliance issues related to scrap invoices, recycling enterprises faced a situation where “no purchases could be made with invoices,” leading to large-scale production cuts in June, with secondary oxide output falling approximately 20%. In Q2, Pr-Nd oxide production rose 2.5% QoQ, while secondary Pr-Nd oxide production declined 8% QoQ.
H2 Outlook: Output Recovery Slow During Compliance Rectification, Full-Year Share Expected at 40%
Looking ahead to H2, the recovery in secondary output will not happen overnight. The new national standard GB/T 46992-2025, *Classification of Recyclable Rare Earth Secondary Resources and Technical Specifications for Comprehensive Utilization*, officially took effect on July 1, and the recycling market is now undergoing a period of scrap invoicing and tax compliance rectification, with overall operating rates likely to remain low in the near term. Although the subsequent arrival of peak demand season may drive magnetic material enterprises to raise their operating rates, thereby increasing tax-compliant scrap output, this will be unlikely to fully cover the production shortfall. Secondary Pr-Nd oxide output in H2 is expected to fall short of H1 levels, accounting for about 37%. Against the backdrop of steady raw ore capacity expansion, the share of secondary Pr-Nd oxide will continue to decline, with the full-year share estimated at approximately 40%.
![[SMM Analysis] India Rare Earths: Application End Potential Is Real, But Industry Chain Self-Reliance Is Still Early](https://imgqn.smm.cn/usercenter/wHkop20251217171744.jpeg)
