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China’s proposed rare earths policy seen exerting downward pressure on prices in short term

20th May 2016

By: Ilan Solomons

Creamer Media Staff Writer

  

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China’s Ministry of Industry and Information Technology (MIIT) intends to set new standards for domestic rare-earth- elements (REE) producers. Currently, this is still in the proposal stage and public opinion will be considered.

However, the idea is to specify minimum production use levels, recovery rates and yields, as well as to implement an exploitation plan that complies with environmental standards. This is according to mining consultancy Core Consultants’ monthly REE report for May.

Core Consultants MD Lara Smith notes that, in the first quarter of 2016, the average operation rates at Chinese smelters were 52.6%. She says that, if this plan is implemented by the MIIT, then the expectation is that these rates will rise above 65% at the outset.

“Long-term, we believe this is a step in the right direction and will increase China’s overall efficiencies and modernise the industry. In the short term, higher production rates may place further downward pressure on prices.”

The report highlights that, since mid-April, there have been rumours that China’s National Development and Reform Commission would begin stockpiling material.

Smith states that this has translated into higher offer prices from domestic producers. However, she notes, as there have been a number of false starts with respect to stockpiling, with the result that offer prices have risen, followed by panic selling, transactions have been “relatively lacklustre”.

Core Consultants believes the most exposed are Europe’s praseodymium oxide consumers, as they have almost no stockpiles and have refused to “bite at these higher prices”, preferring to hold off from replenishing stocks.

Smith comments that, if stockpiling starts and prices rise further, then these importers may be forced to restock at higher levels.

She points out that, outside of China, India is considering making certain REE mining blocks available to companies. Smith explains that, currently, India’s Atomic Mineral Concession Rules prevent private companies from exploiting radioactive monazite deposits and, therefore, State-owned Indian Rare Earth is the sole REE producer in the country.

Further, the report highlights that the provincial government of the province of Quebec, in Canada, has decided to provide $15-million in finance to Canadian clean technology company Orbite Technologies.

In 2014, the Canadian government revealed that it was targeting to secure 20% of the global REE supply by 2018 and would, therefore, invest in the sector. However, the report notes that, currently, Canada-based natural resource company Great Western Minerals Group’s Hoidas Lake mine, in northern Saskatchewan, is the country’s only significant project and, therefore, it is unlikely that this goal will be realised.

Smith remarks that, with respect to the end-user market, Germany is following China’s lead of providing subsidies for its electric vehicle sector. She says that this initiative is expected to enable Germany to see 500 000 electric vehicles on the road by 2020 – which is ten times the current number.

The report states that positive electric vehicle growth is expected to spur growth in the permanent- magnet sector, which has been constrained of late, owing to oversupply.

“We expect volume demand for neodymium magnets to rise 10% this year

,” the report concludes.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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