Rare Earths: Year in Review 2014

By Antonio Torrisi
Published: Wednesday, 31 December 2014

Despite new production coming online from US-based Molycorp in 2012 and Australia-based Lynas Corp. in 2013, China still retained almost 90% of global rare earths production in 2014.

Despite new production coming online from US-based Molycorp in 2012 and Australia-based Lynas Corp. in 2013, China still retained almost 90% of global rare earths production in 2014.

Market demand was sluggish throughout 2014 in many high-tech applications, with prices continuing to display volatility.

The lack of demand and low prices impacted rare earths producers inside and outside China, with Molycorp and Lynas posting widening losses while failing to secure investor confidence.

However, Beijing began political reforms seeking to control China’s domestic rare earths industry, tackle illegal mining and environmental issues and promote natural resource conservation.

Meanwhile, a large number of junior companies continued to develop rare earth projects outside China, particularly in the US, Australia, Africa and Europe. 

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Weak prices continue to dog rare earths, but new production is gradually coming online outside China.


SUPPLY SECURITY


In January 2014, China’s Ministry of Industry and Information Technology (MIIT) approved a consolidation plan supporting the formation of six large rare earths enterprises in the country.

Inner Mongolia Baotou Steel Rare Earths Hi-Tech Co., the world’s largest producer of rare earths, completed its consolidation programme in August 2014, with the formation of the North Baotou Steel Rare Earth Group.

China Minmetals Corp. completed its plan in December 2014, with the control of 31 companies, seven of which were rare earth separation plants and three were mining companies. 

China also started tightening control over illegal smuggling, with 14 cases leading to prosecution. Statistical data from the Chinese Rare Earths Association revealed that up to 40% of rare earth mining in China was illegal and 70% of dysprosium – a critical heavy rare earth for technological applications – produced in 2012 was of unknown origin.

The MIIT set out a plan in October 2014 to counteract illegal mining through a coordinated investigative action among ministries and local governments to monitor tax payments, mining permits and safety issues for mining, processing and separation companies. 

The Chinese government also announced a plan to financially support rare earth groups with large production capacities, as well as environmental management programmes and the development of the downstream industry.

Meanwhile, China’s total rare earths export quotas for 2014 remained flat year-on-year (y-o-y) at 30,600 tonnes, despite a pending appeal filed by the US, Europe and Japan to the World Trade Organization (WTO) against Chinese rare earths and tungsten export quotas in 2012. Rare earths exports rose by 60.4% y-o-y between January and May 2014, with Japan and the US being the main importing countries. 

In March 2014, the WTO condemned China’s rare earths export quotas, ruling that they did not comply with international rules of free trade, did not address environmental problems and did not work to conserve areas previously mined.

In April 2014, China also opened the Baotou Rare Earth Products Exchange in order to control pricing among Chinese firms and set standards in rare earths trading. It also stockpiled rare earths at higher prices compared to those traded on the domestic market in an attempt to boost prices globally.

Outside China, Molycorp experienced technical bottlenecks at its chloro-alkali facility at Mountain Pass, in California, US, which prevented it from ramping up production to its 20,000 tpa target capacity. 

Despite being similarly hit by bearish rare earths prices, Lynas was able to ramp-up rare earths production at its Lynas Advanced Materials (LAMP) facility in Malaysia during 2014 and passed a final regulatory hurdle to operate the processing plant.

MARKET DEMAND

Chinese rare earths producers saw their profits decrease during 2014, owing to lower demand in the domestic market and falling prices, with Inner Mongolia Baotou and China Minmetals posting a 73.5% and 94.1% drop in profit, respectively, during H1 2014.

However, Chinese neodymium-iron-boron (NdFeB) magnet producers recorded higher demand on the back of an uptick in consumption by hybrid vehicle motor manufacturers, wind turbines and air conditioning manufacturers.

PRICE TRENDS

Rare earth prices remained volatile for the first half of 2014 and continued to fall during the year, with prices for cerium oxide, neodymium oxide and dysprosium oxide decreasing by 49.1%, 19.4% and 35% y-o-y, respectively, as of August 2014. 

The price of cerium oxide was $4.3-5.3/kg as of December 2014, with prices for neodymium oxide and dysprosium oxide being $58-68/kg and $320-375/kg, respectively, in the same period. 

MARKET OUTLOOK

The Chinese government announced it would lift export quotas in 2015 in order to comply with the WTO’s ruling, but it plans to increase the tax rate to 35% on heavy rare earths (HREE) and to 22% on light rare earths (LREE). The measure is expected to push up rare earths prices during 2015.

Meanwhile, rare earths industry players said at the 10th International Rare Earths Conference in Singapore in November 2014 that demand in the rare earths industry could be revived by a growing automotive market, which will particularly affect NdFeB magnets and cerium oxide-based catalysts.

The magnets industry, which has been dominated by Japanese products, is likely to see stronger competition from Chinese magnets producers as an industrial alliance in China announced it would challenge Hitachi Metals’ monopoly in NdFeB supply to the US market, following the expiration of the company’s 5468 patent in July 2014.

Some automakers and high-tech industry manufacturers expressed concern about future rare earths supply security, fearing the possibility of a repeated crisis similar to that in 2011, which saw a spike in rare earths prices, after increased stockpiling.

Several junior companies, including Geomega Resources, Ucore Rare Metals and Rare Earth Salts, are investigating alternative routes in rare earths processing and separation, which could lead to more efficient production methods; however, this is unlikely to come to fruition in the near term.