INDUSTRIAL METALS / MINERALS
More rare earth companies in China suspending production as prices slide
In a bid to stabilise the rare earths market amid falling local prices and balance the supply and demand position, much of the rare earths mining sector in China is temporarily halting output.
Posted: Thursday , 27 Oct 2011
Even as China's largest rare earths producer, Baotou, suspended rare earths production for one month in an effort to prop up sliding prices, several others are set to follow suit. A persistent slump in prices and rising uncertainty across the sector has got China's rare-earths industry battling production halts.
Average prices for rare earth oxides have fallen more than 20% in the past three months, analysts tracking the sector said. Speculation had sent prices soaring in the first half of the year, but the market has since retreated, they said.
"This month, the price of neodymium oxide declined 34% to $157 per kilogram, while europium oxide slid 35% to $2,904 per kilogram. All of this has shaken the industry in China,'' said an analyst with an investment firm. Praseodymium-neodymium oxide has also dropped 11% as compared to the price before China's National Holiday, between October 1 to October 7.
In order to check the slide, Ganzhou Rare Earth Mineral Industry, a leading rare earth producer in south China, has also decided to suspend production since October 20, at all its mines and smelting and refining enterprises. An official with the company has been quoted by newswires as saying that the suspension was mainly due to the exhausted quota as well as the preparation for consolidating rare earth mines and building an industry chain in southern areas.
Analysts note that in August too, another producer China Minmetals Non-ferrous had called on smaller domestic rare earth separating companies to suspend production due to exhausted output quotas. The decision has ensured that many intermediary traders and miners in both Ganzhou city in Jiangxi province and Inner Mongolia Autonomous Region, suffered severe financial losses, say analysts.
Reserves of rare earth minerals in China, the world's largest producer and exporter, fell by 37% during the 11th Five-Year Plan period in the region. China produced 118,900 tonnes of rare earth products in 2010. Inner Mongolia Baotou Steel Rare Earth Group Hi-Tech accounted for more than 60% of the global rare earth market.
Analysts tracking rare earths say the global market has experienced massive upheaval recently, with prices falling sharply in June 2011. ``Prices started to pick up in mid-2009. Ytterbium, one of the 17 rare earth elements, surged more than 10 times since 2009 and more than three times since January 2011. The price of ytterbium too was around $89.83 to $93.00 a kilogram,'' said a analyst with an investment firm.
Statistics from the Jiangxi Rare Earth Industry Association show that in the first eight months of 2011, the actual rare earth output in Ganzhou was widely at variance with the government set production plan. The association has said that at least a half of the rare earth resources were tapped privately.
Praseodymium and neodymium, which are refined from the rare earth Nd-Fe-B, saw a seven-fold jump in prices from 280,000 yuan per tonne to a peak of 1.68 million yuan per tonne in the first half of this year. Another rare earth product, dysprosium, surged from 1,400 yuan per kilo to 14,545 yuan in the same period.
Starting from June, however, rare earth prices witnessed a major change. From June until now praseodymium and neodymium prices have dived to 1.07 million yuan per tonne and the price of dysprosium has slipped to 9,250 yuan per kilo.
Cerium oxide, used in ceramics to polish glass and stones, was sold in China for $28.64 a kilogram from the beginning of July, a 7.2% decline from early June when the price was $30.86 a kilogram.
Similarly, the price of lanthanum oxide, used in lithium ion batteries for hybrid cars, fell from $25.93 to $24.77 a kilogram during the same period. Neodymium oxide, which is used in permanent magnets and wind turbines, fell from $242.28 to $236.84 a kilogram, analysts said.
They added that the price surge of rare earths in the first half had exerted huge pressure on downstream companies, which in turn slashed their demand. Though China is the world's largest exporter of rare earth minerals, supplying more than 90% of the international market, the Asian country has only about 30% of global reserves.
Though the United States, Canada, South Africa and Australia have rare earths deposits, the nations practically stopped mining them in the 1990s as lower-cost Chinese ores flooded the market. Though several companies are restarting production in Canada, California and Russia, analysts say it will take a while for supplies to reach the market.