EDITOR: | May 3rd, 2016 | 2 Comments

Core Consultants’ Rare Earth Market Summary

| May 03, 2016 | 2 Comments
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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.

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.


Lara Smith

Editor:

Lara has been an analyst for over ten years, starting her career as an equity analyst at Foord Asset Management and more recently as the ... <Read more about Lara Smith>


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Comments

  • Thomas Kruemmer

    Hoidas Lake is a project of more than a year bankruptcy protected Great Western Minerals. How this project could be prospective escapes me, or have there been any recent concrete and tangible actions with regard to this resource?

    May 9, 2016 - 1:50 AM

  • Lara Smith

    It was more of a statement that Canada’s really only significant project had been Hoidas Lake and therefore is unlikely to achieve its goal of 20% supply, rather than a statement of the project’s solvency. It is common knowledge that HL is bankrupt and that the deposit is too small, too low grade and too metallurgically complex to be of value.

    May 9, 2016 - 2:58 AM

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