Rare earth industry lingers in hangover, says Lynas

Strong growth: CRT TV phosphors are likely to see robust expansion in rare earths consumption gskx

Curtis believes that the current period constitutes the hangover from the price hike that took place during 2011.

However, “we don’t think it is a bad time,” he said, but added “we do think it is a necessary time”.

The industry changes both in pricing and structure, are a necessary part of its development but while a negative period is definitely showing, it does not herald an extended decline.

Curtis harked back to the indium market which, he said, compares quite closely with rare earths.

The indium market saw the same stockpiling, which lead to a dramatic rise in price, and the same hangover that the rare earths industry has seen, Curtis said, but the importance of this is that a stable price that suited both producers and consumers was eventually reached.

Rare earths will likely follow the same pattern: “Prices will stabilise to a point that is acceptable to both producers and consumers,” Curtis emphasised.

Challenges for new players

The hangover is causing significant changes to the rare earth industry, Curtis added. Some of these changes have solved problems while some have exposed fresh issues.

Entrance is still a challenge for junior companies and it has become more important to build a supply chain but this is not an easy task.

Lynas has transitioned from a 5,000 tpa operation that was initially to be brought online quickly for $30m capital investment to a project that has taken 10 years and cost more than $800m, “so I can tell you, it is hard!” exclaimed Curtis.

China’s dominance

These supply chains are important for new industry players to help shake the dominance that China has on the rare earth industry.

“We have allowed the midstream IP [intellectual property] to move almost entirely to China (...) and that’s bad,” said Curtis.

The rebuilding of a magnet supply chain outside of China is critical to the industry’s future, he added, and it is unhealthy not to have strong supply chains that exist across a number of regions.

The move to China, however, was not because of the cheap labour but rather because of the work and research the country carried out on rare earths, Judith Chegwidden of Roskill Consultancy Group pointed out.

Many of the people you meet at the research complexes, like Baotao’s, have Phds and have worked in the rare earths industry for 10 years, she said, so this, rather than cheap labour, been responsible for the shift of processing to China.

End user substitution

With the instability caused by the recent price rises during 2010 and 2011, several end users have been gravitating towards rare earth substitutes.

“Rare earths are still the best materials to use,” said Curtis, and so end users will prefer to use rare earths if it is feasible.

For this, the industry has to build trust and long-term relationships with the end markets, he outlined, and find a long-term pricing level that will suit both parties as well as a guaranteed stable supply.

Long-term growth

Depending on supply stability, Curtis believes that there is good long-term growth potential in the rare earths industry.

Of the various end sectors, the catalyst market will see the most robust growth and although there have been movements away from the use of cerium, now that prices have dropped slightly, end users should return to this material.

The oil sector is, Curtis believes, the most stable market in the industry and is likely to remain so.

Of the other end markets, “we still think that there is a substantial period of growth in the phosphors industry, he said, while acknowledging that this view would promote controversy.