EDITOR: | June 7th, 2016

Core Consultants’ Rare Earth Market Summary: China reforms its resource taxes

| June 07, 2016 | No Comments
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Stock market graph and office workCore Consultants has now released its June Rare Earth Monthly Report. The main topics in this feature looks at China’s new resource tax structure, new investments into rare earth smelting and changes to incentive schemes in the electric vehicle market.

Market Summary

From 1 July, China will expand its reform of resource taxes across the board and base this tax on prices instead of quantity. Authorities believe that a price-based tax would reduce tax burdens on those unprofitable resource sectors (such as rare earths) and boost taxes on the more profitable sectors. The expectation is that taxes will follow the resource-cycle.

The second batch of commercial stockpiling was set to end on 31 May. The initiative helped boost prices, albeit only temporarily. Prices such as terbium rose 17% m.o.m in May in anticipation of the purchases. Going forward, prices are expected to decline in June and stabilise in July as suppliers have been unable to sustain these price levels. A number of end-user markets such as permanent magnets and fluorescent lighting (phosphor powder) are under pressure, which is negatively impacting on key raw materials including dysprosium, yttrium and mischmetal.

Outside of China, there is very little positive corporate activity and very few funds for new rare earth endeavours. However, Canada Rare Earth has acquired a separation facility in Lao to process monazite. The annual capacity is 3,000 tonnes, though the deal is still subject to certain conditions.  India is now considering investing in its monazite resources and is looking into the option of extracting rare earths from Red Mud.

With respect to the end user market, last month Germany revealed that it would spend €1bn on incentives to encourage the uptake of EV’s. This month, Germany has improved on its already generous subsidy scheme by making more tax rebates available.

Meanwhile the subject of rare earth magnet recycling has again come to the fore. Mitsubishi revealed that it is making headway with extracting magnets from home appliances. The European Union has been focused on recycling magnets from hard discs (HDD’s). At present Europe is virtually wholly dependent on China for its rare earth magnet requirements and this is regarded as a country risk given the expected uptake of both EV’s and wind power and expected increased dependence on permanent magnets in the medium term.

In terms of our outlook for prices, we expect that heavy rare earth domestic prices will decline by 2% in June before stabilising in July. Light rare earths increased 3% m.o.m in May and are expected to decline by 1% m.om in both June and July

A similar trajectory is expected in the export market as prices are expected to decline by 1% m.o.m in both June and July in both the heavy and light rare earth markets.


Lara Smith

Editor:

The Founder and Managing Director of Core Consultants in June 2009, Lara and her team are committed to supplying high quality commodity market research, analysis ... <Read more about Lara Smith>


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