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Rare Earth Industry is Expected to Embrace an Opportunity of Recovery

In the recent several months, the Ministry of Land and Resources and the MIIT one after another unveiled industry supporting policies, rare earth industry is included into the national guidance restructuring plan, a series of favorable factors including the setup of six major rare earth industry groups, and opening of rare earth international industrial forum emerged continually, coupled with rapid development of China’s new energy vehicle, new energy industry and information industry, all these combine to create rare earth new situation for application industries. According to analysis of some institutional reports, China’s rare earth industry is expected to recover after experiencing downturn.

According to statistical data of the Association of China Rare Earth Industry, prices of neodymium and praseodymium oxide, neodymium and praseodymium metal fell slightly in August, listed average price of neodymium and praseodymium oxide is 255,900 yuan/tonne, down by 1.59% compared to the average price of 260,000 yuan/tonne in July; listed average price of neodymium and praseodymium metals is 324,000 yuan/tonne, down by 3.82% compared to 336,900 yuan/tonne in July.

Regarding the reasons lying behind this round of rare earth price drop, Qiu Shaomei, researcher of Zero Power, told “China Enterprise News” that, firstly, due to release of overseas rare earth capacity, the demand for China’s rare earth dropped, which dragged down China’s export price. Secondly, abnormal fluctuation of rare earth prices in 2011 resulted in production surplus of some products, inventory increased, consequently demand of downstream manufacturers declined. Thirdly, China’s rare earth industry is experiencing across-the- board capacity surplus ranging from resource to material production, capacity surplus in some segmented sectors even reached several folds.

While some rare earth products experienced price drop, due to impact of relevant stimulation policies from the State Council, rare earth permanent magnet division recently kept rising. According to relevant statistical data, among 23 stocks in normal trading in early September which are associated with rare earth permanent magnet concept, only one enterprise’s stock fell, the remaining 22 stocks all rose by 1% or above, stocks of Zhong Ke San Huan and BGRIMM Magnetic Materials & Technology hit limit-up. According to analysts, as rare earth industry is included into the national guidance restructuring plan, the “rarity” of rare earth permanent magnet division on the secondary market will become more prominent, rare earth prices have entered all-round rising path.

Regarding the price rally of some rare earth products, Li Yuheng, researcher of CI Consulting specializing in new energy vehicle industrial chain, recently told journalist of “China Enterprise News” that, “About reasons of its rally, firstly, the state government recently unveiled relevant supporting policies for the rare earth industry; secondly, the integration restructuring plan of six rare earth enterprises successfully finished record-keeping, industry integration will surely improve the condition of China’s rare earth industry, increase concentration degree, and promote industrial upgrading; thirdly, with rapid development of emerging industries, rare earth industry is expected to expand market demand, prices are expected to bottom out.”

In fact, just like what industry insiders said, up till now rare earth prices displayed obvious signs of rally. For instance, in March 2007 price of metal Neodymium was 226,000 yuan/tonne, today it has reached 319,000 yuan/tonne; the price of metal Dysprosium has risen from 860 yuan/kg in August 2007 to the current level of 1700 yuan/kg.

According to analysts, rally of rare earth prices benefited from favorable government policy + enterprise integration.

As rare earth industry is included into national guidance restructuring plan, rare earth industry is expected to walk out of winter. Recently, the Ministry of Land and Resources and the MIIT one after another unveiled industry supporting policies. After consultation with relevant departments, the MIIT unveiled “Standard Conditions for Rare Earth Industry (2016 version)” and the “Administrative Measures for the Announcement of the Standard Conditions for Rare Earth Industry”, which came into force since July 1. The MIIT also distributed rare earth total production volume control plan for 2016 in two batches. In the next step, the central government also will introduce a series of supporting policies. On the other hand, industry upstream resources and production index will be further concentrated on six groups. In 2016 the nationwide total mining volume control index of rare earth ore (rare earth oxide REO) is 105, 000 tonnes.

In a separate development, in 2015, the National Standardization Technical Committee organized compilation and published 39 rare earth standards. The compilation of rare earth international standards has also kicked off.

While enjoying favorable policies, integration of rare earth industry picked up speed. At the end of June this year, the setup of China South Rare Earth Group passed examination and acceptance, and began to enter substantial operation stage; the setup work of Guangdong Rare Earth Group and Minmetals Rare Earth Group is still under way. Up till now, along with the previously set up China North Rare Earth Group, Xiamen Tungsten Co., Ltd and Chinalco Group, China has set up six major rare earth groups.

According to chief persons in charge of the rare earth industry management department: “Currently the setup of six rare earth groups has increased industry concentration degree, and evidently improved control over rare earth upstream industry.” In October 2015, six major rare earth groups one after another joined the ranks of “l(fā)imiting production and keeping price”. The setup of six major groups represents a key measure by the state government in rectifying rare earth industry order, and promoting healthy development of rare earth industry, which can not only enable collective control of rare earth resources, prevent occurrence of rare earth low-standard repeated construction and avoid private mining phenomenon, but also help bring out rare earth supply main channel, alleviate the current supply-demand contradiction of rare earth resources, remove stock, and propel the development of rare earth high-end application industry.

Industry insiders pointed out that, continually emerging market demand brings huge potential for rare earth industry development. China’s new energy vehicle, rapid development of new energy industry and information industry creates new situation for rare earth application industry. Especially in the new energy vehicle sector, growths of production and sales are expected to accelerate, it is expected whole year production and sales will reach 600,000 vehicles. Driven by demand of new energy vehicle, magnetic material industry recently experienced relatively fast growth, in which the most promising product is NdFeB for new energy vehicle motor drive. Rare earth permanent magnet is also widely used in wind power, and energy saving high-efficiency motor industry. Meanwhile, demand for rare earth permanent magnet, rare earth catalysis, rare earth polishing and rare earth luminescent new materials also keep growing, the demand for rare earth upstream products is also rising, this will surely boost the rebound of rare earth raw material prices, it is expected that by 2020, rare earth prices will have risen by 10%-20% on the current basis.

In fact, in August this year, China’s rare earth export is 4170 tonnes, up by 47.5% on Y-o-Y basis, which promises great export prospects.

According to Wang Zhongshan, technical consultant of the Association of China Rare Earth Industry Alloy Branch, China rare earth industry should quicken the pace to complete structure adjustment, transition and upgrading, while expanding domestic demand, it should accomplish innovative popularization and application, expand export, stop the falling price trend. Given time, China’s rare earth industry is expected ot recover after downturn.