Pr-Nd rebounded first in July, downstream demand showed signs of recovery. Will rare earths rally in August? [SMM Monthly Analysis]

In July, the rare earth industry chain showed a divergence in trends. Light rare earth Pr-Nd oxide experienced both volume and price increases in July. In contrast, terbium oxide and dysprosium oxide were significantly affected by the decline in early to mid-July. Although prices rebounded in late July, they still showed an overall downward trend for the month, with both terbium oxide and dysprosium oxide falling by more than 5%. Entering August, influenced by the MoM increase in downstream orders for magnetic materials since July, the rare earth market continued the trend of more rises than falls seen in late July. As rare earths gradually transition from the off-season to the peak season, the improvement and extent of downstream end-user demand will become important factors affecting rare earth prices.

Pr-Nd oxide rose by 1.1% in July, with production up 3% MoM

Light rare earths: Taking the price trend of Pr-Nd oxide as an example, according to SMM quotes, the average price of Pr-Nd oxide on July 31 was 367,000 yuan/mt, compared to 363,000 yuan/mt on June 28, with an increase of 4,000 yuan/mt in July, representing a monthly increase of 1.1%. Entering August, as of August 12, driven by factors such as China Northern Rare Earth's "flat hanging" boosting market confidence, reduced rare earth imports from Myanmar leading to expected supply reductions, and a slight recovery in downstream magnetic material demand, Pr-Nd oxide prices saw more rises than falls, with the average price on August 12 at 374,000 yuan/mt.

Pr-Nd oxide production: In July 2024, domestic Pr-Nd oxide production was 7,550 mt, up 3% MoM. The main reduction was in Hunan and Fujian regions. According to SMM statistics, the planned resumption of some separation plants in July was delayed. However, downstream magnetic material orders improved relatively in July, leading to a recovery in rare earth prices, and some separation plants increased their operating rates. Some industry participants indicated that with the continued reduction in rare earth ore imports from the US, the operating rate of separation plants in Sichuan is expected to decrease starting this month, and Pr-Nd oxide production in Sichuan is expected to decrease MoM in August.

Dysprosium oxide prices fell by 5.52% in July, with domestic production up 5.7% MoM

Medium-heavy rare earths: Taking the price trend of dysprosium oxide as an example, according to SMM quotes, the average price of dysprosium oxide on July 31 was 1,710 yuan/kg, compared to 1,810 yuan/kg on June 28, with a decrease of 100 yuan/kg in July, representing a monthly decrease of 5.52%. Entering August, dysprosium oxide prices saw more rises than falls, with the average price on August 12 at 1,735 yuan/kg.

Dysprosium oxide production: In July 2024, domestic dysprosium oxide production was 226 mt, up 5.7% MoM, with the main increase in Jiangxi and Inner Mongolia regions.

Terbium oxide prices fell by 5.05% in July, with domestic production up 3% MoM

Medium-heavy rare earths: Taking the price trend of terbium oxide as an example, according to SMM quotes, the average price of terbium oxide on July 31 was 5,080 yuan/kg, compared to 5,350 yuan/kg on June 28, with a decrease of 270 yuan/kg in July, representing a monthly decrease of 5.05%. Entering August, terbium oxide prices saw more rises than falls, with the average price on August 12 at 5,200 yuan/kg.

Terbium oxide production: In July 2024, domestic terbium oxide production was 42 mt, up 3% MoM, with the main increase in Jiangxi and Fujian regions.

Outlook: Rare earth prices may remain stable in the short term, with the traditional peak season expected to drive prices up

Supply side: According to SMM, upstream holders were continuously bearish on the market in the early period, actively selling products, leading to low inventory levels for traders and separation plants, resulting in a supply shortage in the upstream rare earth market in late July. In August, Pr-Nd oxide production in Sichuan is expected to decrease MoM. Currently, rare earth ore supply from Myanmar has not yet recovered, and most holders are selling previous inventories. Some industry participants indicated that Myanmar's rare earth mines will resume production in mid-September, and medium-heavy rare earth oxide production in August is expected to fluctuate slightly compared to July. Entering September, with the potential resumption of Myanmar's rare earth mines and the commissioning of new capacities by some domestic companies, rare earth supply in September is expected to increase.

Demand side: Since July, orders from magnetic material companies have slightly increased MoM compared to June. The supply shortage in the rare earth market in late July, the gradual increase in downstream inquiries, and the spread of positive news have boosted confidence among some industry participants, leading traders to start stockpiling, significantly increasing market procurement compared to the previous period, and rare earth prices began to recover significantly in late July. Considering the expectation of early stocking by wind power and new energy companies by the end of the year, rare earth procurement is expected to increase, leading to improved demand.

In summary, SMM expects that as the rare earth industry transitions from the off-season to the peak season, and with the gradual start of stocking by rare earth end-users in Q4, rare earth prices will continue to run steadily in the short term. In the medium and long-term, with the arrival of the traditional peak season of September-October, rare earth demand is expected to increase, potentially driving prices up. However, with rare earth supply expected to return to normal in September, considering the fundamentals of increased supply and demand, the price increase in the future may not be significant.