EDITOR: | December 1st, 2014 | 19 Comments

Lifton translates Chinese rare earths export volumes and pricing

| December 01, 2014 | 19 Comments
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InvestorIntel’s Publisher Tracy Weslosky sent me an urgent note this weekend that read: “please translate and tell me what this means.” The information she sent me from Asian correspondent Hongpo Shen shows that the dependence of Japan and the US for rare earths upon exports from China — although lessening a bit for light rare earths, perhaps due to Molycorp and even Lynas production, shows a continuing dependence upon China for imports of mid-range and heavy rare earths as chemical compounds, metals, and alloys.

The several predictive reports of supply/demand pricing now on the market have their value for long term planning, but Hongpo has supplied InvestorIntel readers with ACTUAL Jan-Sep, 2014, CHINESE EXPORT VOLUMES AND PRICING.

Hongpo’s text and data are below. Following the text and the data are my calculations of the Jan-Sep 2014 average pricing for rare earths in the form of carbonates, halides, oxides, and metals exported, duty paid from China.

China’s total exports of rare earths by tonnage for October, 2014, declined 2.28% compared year-on-year to October, 2013. There were 2,014 tons shipped in October, 2014. This was after dropping 2.21% in September, 2014 compared year-on-year to September 2013 to 1,957 tons. For 2014 October’s exports value tumbled 27.7% year-on-year compared to October 2013 to $22.314 million. It’s the first time since 2013 that export volume had negative growth for two consecutive months, according to the data from Chinese General Administration of Customs.

For the first ten months of 2014 cumulatively, China’s rare earth exports rose 26.3% year-on-year to compared to 2013 to a total of 22,184 tons. In value terms, however, exports tumbled 21.3% from a year earlier to a cumulative total of $315.101 million owing to falling prices, new customs data showed on November 21st.

China exported approximately 968 tons of rare earths to Japan in October 2014. That amount was up 20.39% year-on-year, compared with October 2013. The October 2014, export was valued at $11.318 million, so the average export price was at $11,692.53 per ton.

Japan imported a total of 9,504 tons of rare earths from China in the first ten months of 2014. This was an increase of 73.02% from the corresponding period in 2013. Japan’s imports of rare earths from China, accounted for nearly 42.5% of China’s total export amount during the first three quarters of 2014. Of this about 7,745.8 tons were light rare earths and about 774.5 tons were heavy and medium rare earths, Chinese export customs statistics showed.

The US is China’s second-largest rare earth buyer behind the Japanese. The US accounted for nearly 33.9% of China’s total exports of rare earth during the first three quarters of 2014. After dropping 46.05 % in total for 2014, year-on-year, compared to 2013, and with a total of just 469 tons in September 2014, which was an 11% drop from the 529 tons of rare earths imported from China in September 2013. The overall total of rare earths imported from China by the US through October 2014 was down 27.65% compared to the same period in 2013, while these exports were valued at $4.289 million for an average export price of $ 8,108.2 per ton in October 2014. From January to October this year, the US in total imported about 7,442 tons of rare earths from China, which represented an increase of 15.44% over the corresponding period in 2013.

Japan imported a total of 13,197 metric tons of rare earths with 62% of these rare earth from China in 2013, according to the figures from Japan Society of New Metals. Therefore Japan is still reliant on China for its rare earth imports at present.

Compared with Japan, the US may be gradually reducing its dependence on China for light rare earths. In fact, US imports of China’s rare earths are gradually declining in this year, especially as China totally exported only 8120.2 tons rare earth to the US in the last year, a significant reduction compared to the same period in 2012.

According to the Chinese General Administration of Customs, China’s total export of single rare earth oxides rebounded to 12,206.827 tons in the first nine months of the year 2014, up by 19.3% compared with the same period in 2013. The total value of the export of individual rare earth oxides was put at $185.190 million, a decrease of approximately 11.6% year-on-year from the 2013 total for the same 9-month period. In the same 9 months of 2014 the export of rare earth metals rose 26.1% year-on-year with an additional 2,894.915 tons, valued at $64.710 million. There was a decrease in revenue of 35.1% year-on-year. Yet the export of rare earth salts surged 66.7% year-on-year to 5,422.083 tons, valued at $46.681 million, which was an increase in revenue of 19.4% year-on-year. Finally the export of rare earth mischmetal alloy increased 33.3% to 405.405 tons, valued at $4.245million. An increase of revenue of 56.5% year-on-year.

China exported a grand total of 1,471.1 tons of heavy and medium rare earths and 18,593.6 tons of light rare earths in the first nine months of 2014, an increase of 7.5% and 30.3% year on year, respectively.

The following table provides a detailed China’s main rare earth product export statistics for January-September 2014:

2014-12-1-hongpo

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I think the readers only really care about the prices ex-China, duty paid, for some of the critical rare earths as oxides, carbonates, halides, and metals so I will only show these (average) prices for Jan-Sep, 2014, calculated from data above supplied by Hongpo:

info

The prices that I calculated above from the Hongpo data show that the prices for the metals are far above the prices normally shown in the many reports out there. If these numbers are accurate they show that the conversion costs of the rare earth salts to the metal form are the determinative factor for magnet and alloy production. These costs for metals also show that the basket price is at best meaningless and at worst misleading. There can be no basket price for metals! Metals can be produced by metallothermic reduction of molten halides or by electrolytic reduction of molten oxides. Which process is used depends on the chemical properties (particularly the one known as enthalpy) of the rare earth salts involved. Some alloys can also be made by co-reduction, but not all of them. The making of high purity individual rare earth metals is a complex process and therefore costly. The making of alloys to tight specifications requires high purity individual metals and strictly controlled conditions. This type of processing is also expensive.

Japan’s rare earth metals and alloys industry is considered to be the consistently best producer of high quality, tight specification, metals and alloys. However today more and more even of Japanese rare earth metals/alloys production is in China in j/v companies.

The United States where the processes for manufacturing high purity rare earth metals and alloys was pioneered has today no such commercial production whatsoever.

It’s time to restart the US rare earth metals and alloys production industry.


Jack Lifton

Editor:

Jack Lifton is the CEO for Jack Lifton, LLC and is a consultant, author, and lecturer on the market fundamentals of technology metals. Technology metals ... <Read more about Jack Lifton>


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Comments

  • twtom
    December 1, 2014 - 3:48 PM

  • Aat Oskam

    Prices higher than expected: could it be that the illegal exports (some say 40K tons a year in total) brings down the average price? Although they are certainly not reported by the formal Chinese authorities and not included in the calculations.

    December 1, 2014 - 4:25 PM

  • Jack Lifton

    Twtom,

    This is old news, and it isn’t really about vertical integration-the neodymium salt did not come from Steenkampskraal-, but I have to admit that LCM is far ahead of everyone in North America when it comes to being “ready” to be a (toll?) producer of neodymium metal, and I suspect that it could also produce didymium metal. I recall that when David Kennedy ran LCM he told me that LCM would try to see if it could produce rare earth permanent magnet precursor alloys by co-reducing Nd and/or Pr, Tb, or Dy by the electrolysis of molten oxides in a base metal eutectic.
    If I were running GWMG I would move to shut down the mine development and go full steam ahead to ramp up LCM as a toll manufacturer of rare earth metals and alloys. South African geopolitics are getting dodgy. It was a mistake to sell GWTI, but the new owners are solid technically and the US could sure use a domestic rare earth metals/alloys producer, so if the new owners are reading this I ask them to please think about a j/v with or a takeover of LCM.

    December 1, 2014 - 5:07 PM

  • Jack Lifton

    Illegal production of heavy rare earths from ionic adsorption clays in China is hard to hide. It depends on corruption of the local police and political authorities and then corruption among the transportation and customs regulators and officials. I sincerely believe that the Chinese national government wants this to stop, so I am looking for seizures of contraband and detention of officials and criminals in this market.
    I am saying that it is foolish in the long run to think that the prices of the heavy rare earths will be kept low by hidden supplies coming from illegal activities.

    December 1, 2014 - 5:13 PM

  • motherearth

    Jack why doesn’t LCM import enough supplies out of China to make a difference.

    December 1, 2014 - 5:31 PM

  • Mr. kean

    Looks like great western is going bankrupt. What a shame mother

    December 1, 2014 - 7:58 PM

  • twtom

    Jack – Thanks for your message. I think there are two different points of view. Thinking from a strategic perspective for the overall dependence of the western world from china you might be right. But thinking from a business or shareholder perspective, GWG’s latest moves made absolute sense. Once feedstock from SKK is beeing shipped to LCM we will see GWG’s sales and especially margins rise significantly.

    December 2, 2014 - 3:16 AM

  • Lloyd

    I have to comment but without giving too much sensitive information away. In actual fact the current NdPr metal price FOB is USD87.50 per kg according to index pricing. All rare earth developers will continue to use basket price as a means of deriving value. Metal reduction is a downstream process and some companies may fail to understand that they will also need to find a way to convert to metal for magnet applications and to supply certain downstream customers. Both Vietnam and China are competitive against Japan in metal reduction and technically capable and already companies are using Vietnam, although power supply can be unreliable in Vietnam. The price gap between oxide and metal is much higher above than what is already sourced in the market. GWM through LCM has electrolysis, but we should be asking why don’t they use it. Market is soft right now and good prices are available in the market place. I don’t see much changing in the future regarding metal reduction. Asia looks like the best place for it.

    December 2, 2014 - 3:59 AM

  • motherearth

    I bet China limits the amount they sell to LCM, Jack may know more about that? That’s why its important to get SKK up and running.

    December 2, 2014 - 7:58 AM

  • wwwater

    Lloyd – The current capacity of rare earth metal production at LCM is at only 90 tonnes annually which would equates to approximately 275 tonnes of alloy production. That amounts to a fraction of what the annual total demand is. For LCM to scale up to produce rare earth metals at a demand rate to supply only 5% of the annual demand would require more capital than GWMG now needs to develop SKK which would provide the oxides needed for converting the rare earth oxides into metal. Critical rare earth oxides are not available on the open market to LCM for what Jack has indicated LCM do as there are no oxides available either on the open market or from China as China domestically requires what they currently produce as far as critical rare earth oxides.

    December 2, 2014 - 10:15 AM

  • Gareth Hatch

    @wwwater: I’ve seen no evidence of any restrictions on the availability of “critical rare earth oxides” on the “open market”, so can you please clarify your statement on this above?

    December 2, 2014 - 10:24 AM

  • wwwater

    Garth – I omitted the wording “at competitive pricing” Yes, there are oxides available but at what price, not comparable at what may be produced at SKK. Now Nd FOB China is quoted at $57.50 per kg, Nd Metal at $83.00 per kg.

    December 2, 2014 - 10:36 AM

  • Gareth Hatch

    The key question is whether production costs for any project outside of China, will be competitive with or lower than the cost of buying finished goods from China – and whether those production costs factor in the cost of the capital required to produce those materials.

    December 2, 2014 - 12:18 PM

  • Mr. kean

    GREAT WESTERN STOCK PRICE IS AT 3.5 CENTS. IT’S DONE

    December 2, 2014 - 3:12 PM

  • Daniel

    I just set the parameters for negotiations bwn China and Canada for macroeconomic policy negotiations starting in 2015 where Canada could make its production cost the same as in China. That’s if the Feds are smart enough to include manufacturing supply chain as part of the reconstruction of the new world order. This is the only chance the West will be able to influence the reconstruction of the world in the 21st century.

    December 2, 2014 - 4:02 PM

  • Lou

    @wwwater: Jack’s idea that the buyers of GWTI might want to explore the idea of a JV with LCM could be viable. For a template, look at the now defunct JV that Great Western negotiated with GQD. Under that agreement, GWG would have financed the facility. GQD would have held 25% equity interest in the physical plant. GQD would toll process the feedstock. GQD would further receive fees for long term management support of the facility. GQD did not need to put up any of its own money. While it is true that at present, sourcing feedstock at competitive prices for metal or alloy making is a challenge, keep in mind that there would be substantial lead times to retrofit the GWTI facility and order, install and commission strip cast furnaces, etc. Concurrent with a GWTI JV coming on line, some North American Mines will be close to producing feedstock to supply it. Lou

    December 2, 2014 - 4:20 PM

  • Tim Ainsworth

    Massive SP move across the Chinese RE space today, Baotou up $2.07, +9% with 7x average daily volume.

    That price action potentially confirms a trend low last June and reversal.

    Price action was repeated across Baotou’s peers as listed: https://www.google.com/finance?cid=689361

    Can’t see any news ATM but one could suspect a pending announcement re production taxes.

    December 3, 2014 - 2:58 AM

  • Tim Ainsworth

    OK, Baotou & peers appear to have got caught up in the broader move on Chinese markets with no specific RE news.
    Very strong move could well be an indication the bottom is in with punter’s expectation of demand recovery.

    December 3, 2014 - 6:53 AM

  • Mr. kean

    Nothing is gonna move the beaten up REE stocks. Gonna hibernate for another year

    December 3, 2014 - 8:46 AM

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