Expect Stable Rare Earth Prices in February
China has come a long way with respect to cleaning up its rare earth supply chain and managed to systematically reduce illegal mining and trading through its zero-tolerance approach. The Association of China’s Rare Earths has confirmed that these stringencies will continue in 2018 and we should see more closures of illegal mines and those producers that infringe on environmental regulation.
Another development in China is the expansion of its rare earth base. Following more than 1,600 geological surveys across a number of commodities, 110 projects were shown to be economic and so far nine mining licenses have been issued. We understand that the rare earth mineral base has been expanded by 171,000 tonnes. It is unclear at this stage whether these nine licenses have been awarded for rare earth development or other commodities.
Looking outside of China, there has not been too much development over the last month, however Rare Earth Salts is continuing to expand their commercial production. To date the company has produced around 1 to 3 tonnes per month, mainly due to a lack of feedstock. This feedstock is expected by 3Q18 and production will be ramped to up to 24 tonnes per month. From here, the company is expected to expand production to 3,500 tonnes per annum over the next year.
Russia has set aside $1.3bn to develop the Tomoroskoe project in Siberia. This potential for developing this project sounds pretty far fetched at the moment, but we need to concede that there is political willingness from Russia, especially in so far as Tomorosokoe would support Russia’s nuclear ambitions. The deposit is rich in thorium, which is expected to be collected as a by-product and used in Russia’s nuclear programme.
With respect to trends in rare earth applications, China has directed funding into researching new uses for rare earths. A new application of cerium for nanoparticles is now being considered. Nanoparticles play an important role in fuel cells and it is thought that cerium has the potential to replace platinum and make combustion more efficient. However, whether cerium will become the standard is at this stage uncertain.
China is deliberating ending its subsidies on windpower by 2020 and mandate all electricity retailers to purchase renewable energy certificates from producers of wind and solar power.
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At present it would seem that in the face of lower electricity prices from this source, removing subsidies could render a number of windpower producers uneconomic.
Similarly, with electric vehicles, the idea was for China to phase out the subsidy policy by 2020, but some enterprises are still facing financial pressure and are struggling to comply which means that they might need an alternative system of adjustment after these subsidies are phased out.
On prices, Core Consultants expect that the coming month will be relatively stable until after the Chinese Festivities in February where there may be a period of restocking in March.
Note: Extracted from the Core Consultants’ Rare Earth Monthly Report.