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.
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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.