EDITOR: | March 9th, 2016 | 7 Comments

China rare earth exports on the rise

| March 09, 2016 | 7 Comments
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China is exporting more rare earths – but importing fewer permanent magnets, suggesting that the country’s production of those magnets is rising sharply. That’s the conclusion analyst Melanie Debono of London-based Capital Economics reaches in her latest note on rare earths.

(Melanie doesn’t mention illegal production and exports, but bases her analysis on official figures.)

She found that China’s total rare earth element exports were lower in January and February than they were in December due to the Chinese New Year holidays. But that is not the point: even though down a little on the last month of 2015, the exports in the first two months of 2016 were still higher than average monthly export volumes since 2012. Moreover, “in the three months to January, exports of all REE rose sharply compared to the same three months a year earlier”.

And highest on China’s REE export list was lanthanum.

According to data released Tuesday, China exported a total of 3,240 tonnes of rare earth elements in February. That compared with exports of 4,013 tonnes in January and 4,838 tonnes in December. The figures for the first two months were always expected to be lower because of companies closing their doors – they can bolts the doors for longer than the official New Year holiday itself (sometimes two weeks in advance and a week or more after the holiday). But, if Capital Economics averages the January and February data to eliminate the New Year holiday distortions, export growth year-on-year for those two months accelerated by 107% (year-on-year).

As Debono explains, since China axed its REE tariffs in May 2015, monthly export volumes have consistently been higher than the average since 2012. “It is therefore clear that this (the abolition of tariffs) has boosted REE demand,” she adds. But it is a little more complex that that: the export volumes in the first two months of the year were 40% higher than in May 2015. However, the money received by the Chinese was 20% lower, due to the strength of the US dollar and falling REE prices.

The other factor examined by Capital Economics was China’s exports of permanent magnets, the second largest consumer of REE after glass production and polishing. These exports were lower in January than in December but were still high by past standards. Meanwhile, China’s imports of permanent magnets continued to fall sharply. As Debono sees it, this seems to reflect growing domestic production rather than a fall in demand.

“Looking ahead, we expect a policy-driven rise in domestic demand in China this year which should be positive for REE demand. Coupled with a rise in demand from elsewhere, this should help REE prices to recover,” she concludes.

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In a separate note out from Capital Economics, Julian Jessop, the head of commodities research, looks at silver. Why has its price not risen as quickly as gold’s? Jessop believes that silver may simply have recoupled with the prices of more conventional industrial metals rather than with gold. After all, as he notes, industrial uses account for more than 50% of the demand for silver, as opposed to less than 10% in the case of gold’s consumption.

I have made the point several times that silver has a unique problem: that is, it was equally a precious metal and an industrial metal. But now the scales may be tipping more and more to the industrial uses side, and this is being driven partly by silver’s fast growing role as a technology metal, those uses ranging from solar applications to health applications (its antimicrobial properties seeing its use in bandages and medical equipment) and in such areas as water purification technologies.

Sure, it will still have a big role as a precious metal and appeal to investors. But I suggest that, as the years pass, that appeal may diminish as it becomes more and more an industrial/technology metal. In times of economic downturn, that puts silver as a greater disadvantage in precious terms with the appeal of gold.


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Comments

  • Jeff Thompson

    Robin,
    Interesting commentary on silver, a commodity that often goes underreported in the shadow of it’s big brother gold. Always found it appealing due to it’s dual role as a precious metal and as an industrial metal. Will be interesting to see if the recent rise in the gold/silver ratio to 82:1 will break through it’s historical highs of roughly 100:1.
    Jeff

    March 9, 2016 - 7:24 AM

  • shankar vishwanath

    good read, so you are predicting a REE price increase, that is demand driven. Do you see a time where most of the REE that China produces is consumed locally, REE exports become tighter out of China. (mainly due to the geo-political developments)? How does this fit in with other REE producers, Lynas being the only major one outside of China. Incidentally, Lynas have just released their H2 report – tough market conditions, but equally, they now are focused on developing clients globally, including China. They are also increasing production to 100% design capacity with the train 4.

    March 9, 2016 - 11:16 PM

  • Dudley Kingsnorth

    With Mountain Pass on care and maintenance since October 2015 it is hardly surprising that exports from China have increased year-on-year to make up the shortfall.
    It is worthy of note that whereas production is expressed in terms of REO, Exports are a mix of oxides, compounds and metal. Hence ‘average’ prices need to treated with caution as the figure is indicative only.

    March 10, 2016 - 2:17 AM

  • Jeff Thompson

    Also interesting that lanthanum was the largest export, which was identified in a recent GAO/DLA report as now being “critical” and possibly warranting stockpiling, after previously not being identified as such. Not sure if that that identification of La as critical is simply inaccurate or if something really has shifted in it’s supply/demand dynamic, which had broadly been viewed as in oversupply recently.

    March 10, 2016 - 7:23 AM

  • Dudley Kingsnorth

    China is forecasting that demand for hydrogen adsorption alloys will grow at 20%p.a. for the next 5-10 years. These alloys are rich in lanthanum, so maybe potential major consumers are stocking-up. Note that BMW and Toyota have recently announced a form of collaboration in hydrogen vehicles; so it is not “pie in the sky”.
    Lanthanum has an ongoing use in FCC catalysts and the high refractive glass found in wide angle lens (e.g. in CCTVs)

    March 10, 2016 - 8:01 AM

  • Jeff Thompson

    Will be interesting to watch the competition develop between proponents of electric vehicles versus proponents of hydrogen vehicles. Massive infrastructure problems ahead for either but no doubt demand for raw materials will increase for both in the medium term, regardless of whether either is economically sustainable in the long term. Thank you for your thoughts, Dr. Kingsnorth.

    March 10, 2016 - 8:11 AM

  • Tim Ainsworth

    Great irony has to be US Jan imports of 960t La when Mt Pass held 33% in suite, not that Moly appeared to supply Grace more than a few 100t when it was operating.

    Interesting to look at the balance of US imports for Jan:

    25t Y
    12t Ce
    Nil Nd
    100kg Pr
    3kg Tb
    Nil Dy
    25kg Eu
    Nil RE metals

    103kg is the total extent of the “magnetics” imports, but perhaps unlikely for separated PrO.
    28kgs is the extent of the “CREO” imports, + 25t Y.

    But US did import 260t NdFeB, which as Dudley suggests is all wrapped up with oxides, metals, NdFeB scrap & compounds as total “RE exports”.

    Perhaps interesting to look at Nd metal exports 67t (Japan) plus NdO 34t (10t Japan, 21t EU) vs 2152t NdFeB:
    http://www.asianmetal.com/news/data/1282262/NdFeB%20magnet%20by%20country%20Exp%20Jan%202016%20China

    January fairly representative of recent months if you smooth out some of the lumpy liquidation sales. One interesting one was Italy’s purchase of 340t of Yttrium in Nov & Dec representing circa 50% of that elements YoY export growth. Ceramics perhaps?

    March 10, 2016 - 8:30 AM

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