Core Consultants’ Rare Earth Market Summary
Core Consultants published its May edition of the Monthly Rare Earth Report. The main topics in this feature include:
- MIIT new production standards
- Commercial stockpiling due to commence
- Investment from other countries continues
The Ministry of industry and Information Technology (MIIT) intends to set new standards for domestic rare earth producers. At present this is still in the proposal stage and public opinion will be considered. However, the idea is to specify minimum production utilisation levels, recovery rates and yields as well as to implement an exploitation plan that complies with environmental standards. In 1Q16 average operation rates at the smelters were 52.6%. If this plan is implemented, then the expectation is that these rates will rise above 65% at the outset. Long term, we believe that 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.
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Since mid-April, there have been rumours that the National Development and Reform Commission (NDRC) would begin stockpiling material. This has translated into higher offer prices from domestic producers. However, as there have been a number of false starts with respect to stockpiling, with the result that offer prices rise, followed by panic selling, transactions have been relatively lacklustre. We believe the most exposed is 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. If stockpiling commences and prices rise further, then these importers may be forced to restock at higher levels.
Outside of China, India is considering making certain rare earth mining blocks available to companies. To date the Atomic Mineral Concession Rules prevent private companies from exploiting radioactive monazite deposits and therefore State-owned Indian Rare Earth Limited (IREL) is the sole rare earth producer.
The Government of Quebec made a decision to provide $15m finance to Orbite Technologies. At the end of 2014, the Canadian government revealed a target to secure 20% of the rare earth supply by 2018 and would therefore invest in the sector. However currently Hoidas Lake is the only significant project and therefore it is unlikely that this goal will be realised.
With respect to the end user market, Germany is following China’s lead of providing subsidies for its electric vehicle sector. This initiative is expected to enable Germany to see 0.5m EV’s on the roads by 2020- ten times the current level. Positive EV growth is expected to spur growth in the permanent magnet sector which has been constrained of late due to oversupply. We expect volume demand for NdFeB magnets to rise 10% this year.
In terms of our outlook for prices, we expect that May and June will be stable as producers would not be inclined to lower offer prices ahead of possible stockpiling. From July, we expect slightly lower prices and sell-offs following the end of the commercial stockpiling period.
A Sr. Editor and Analyst for InvestorIntel, Lara is an internationally recognized expert in the field of mining analysis and a well-known speaker, Lara has ... <Read more about Lara Smith>