https://www.miningweekly.com

China cutting rare earth output, unnerving global manufacturers

25th October 2018

By: Reuters

  

Font size: - +

LONDON/HOUSTON – The Chinese government is limiting domestic production of rare earth minerals in the second half of the year, a move likely to crimp international exports and send prices for the critical materials higher, according to data from Adamas Intelligence.

China is by far the world's largest producer and consumer of rare earths, a group of 17 elements used to make electric vehicles and consumer electronics. The move is already forcing manufacturers to scour the globe for alternative supplies.

For the second half of 2018, China's quota for rare earth separation and smelting has been cut 36%, an attempt to better control the market, according to Adamas, a research firm that closely tracks the rare earths industry.

China's decision to limit domestic rare earth production to 45 000 tonnes for the second half of 2018 - announced in August and the lowest in more than five years - provides only enough supply for China's domestic buyers, according to Adamas.

The semi-annual quota had risen to 70,000 tonnes in the first half of 2018, 40% higher than the first half of 2017. But that move was largely seen by analysts and electronics manufacturers as a step to legitimize black market production, with Chinese manufacturing consuming most of that supply.

While China is likely to attend to its own needs before exporting, increased exports would require the country to draw on already-low inventories of neodymium (Nd), prasesodymium (Pr) and dysprosium (Dy), used in electric vehicle motors, said Ryan Castilloux of Adamas.

Prices for one key rare earth mineral, PrNd Oxide, could increase by 10% to 50% within the next 12 months, and is on track to double in price within next five years as demand outpaces supply, Castilloux said.

Chinese exports typically supply around 80% of the globe's rare earth needs, about 156 000 tonnes annually. Still, exports tend to oscillate wildly from month to month.

In September, for example, rare earth exports jumped 15% from August levels, despite slipping earlier in the year, according to Chinese government data.

The Chinese Ministry of Industry and Information Technology and the Ministry of Natural Resources did not respond to faxed requests for comment.

WTO FIGHT
China was accused in 2012 of manipulating rare earths exports after it put quotas on overseas shipments in 2010.

In 2012, the United States, the European Union and Japan filed a complaint with the World Trade Organization accusing China of slashing exports to hold down prices for its own manufacturers and to pressure global firms to move to China.

China lost the case in 2014 after the WTO rejected its appeal and it lifted the export quotas.

The U.S. military is worried about China's dominance of the rare earths market, calling it a "significant and growing risk," according to a Pentagon study released earlier this month.

"As they have this standoff with China, eventually they (the US) will need to find alternate sources," said Helen Lau, a metals and mining analyst at Argonaut Securities in Hong Kong, referring to the trade dispute between China and the United States.

However, Lau indicated in a research note on Thursday that the change in the quota was likely tied to the closures of illegal mines in Jiangxi province last month.

"We are not surprised at the quota cuts as China already started a crackdown on illegal mining in Jiangxi province that started in September," she wrote.

Meanwhile Japanese electronics maker Panasonic Corp told Reuters said it is moving to find fresh supply.

"We have been diversifying our procurement channels, building partnerships with our suppliers and working to reduce the use of rare earths," Panasonic said in a statement to Reuters.

MALAYSIAN SUPPLY
Outside of China, Australia's Lynas Corp is the biggest producer of PrNd oxides and the second-largest globally. The company processes rare earth ores from Australia at a plant in Malaysia.

During the quarter that ended in September, PrNd production climbed to a record 1 579 tonnes, the company said in its results on Thursday.

Chief Executive Amanda Lacaze said that demand from Japanese customers was "absolutely buoyant," in a call with analysts after the report.

Lynas's processing plant is under environmental review, raising some concerns that supply could be lost, but for now it remains running.

Overall, prices for rare earths in China have been falling, said Daniel Morgan an analyst with UBS in Sydney. PrNd alloy metal prices in China are selling at 406 000 yuan ($58,400) a tonne, down 24% from a year ago, according to data from Shanghai Metals Markets.

"What the price is telling you, is that there isn't a supply constraint up to now," Morgan said.

Research into rare earth alternatives has come up largely empty, leaving manufacturers beholden to the specialized minerals just as demand for batteries for electric vehicles and other products that use the materials is soaring.

A typical Toyota Prius, for example, uses 25 kg (55 lb) of rare earths, compared to 1 kg (2.2 lb) in a typical combustion-engine vehicle.

Edited by Reuters

Comments

Showroom

Actom image
Actom

Your one-stop global energy-solution partner

VISIT SHOWROOM 
Universal Storage Systems (SA)
Universal Storage Systems (SA)

South African leader in Steel -Racking, -Shelving, and -Mezzanine flooring. Universal has innovated an approach which encompasses conceptualising,...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Hyphen, Eva mine, ferrochrome price make headlines
Hyphen, Eva mine, ferrochrome price make headlines
27th March 2024
Resources Watch
Resources Watch
27th March 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.143 0.175s - 90pq - 2rq
Subscribe Now