Chinese market sentiment in early May overestimated consumer demand for rare earths oxides, resulting in the first price increases for rare earths dysprosium (Dy) and praseodymium neodymium (PrNd) oxide this year.
“This was the first time rare earths prices had recovered after a continuous decline last year, but after a brief recovery, prices are now falling again,” said Benchmark pricing and data analyst George Ingall.
Dysprosium oxide went up 10% month-on-month, finishing May at RMB 2,175,000 ($300,150) per tonne, according toBenchmark’s Rare Earths Price Assessment.
The spike in market sentiment produced a less exaggerated price effect on PrNd oxide, a larger market, which went up 0.6% on April to hit RMB 391,500 ($54,027) per tonne, according toBenchmark’s Rare Earths Price Assessment.
Chinese state-owned China Northern was one of those that contributed to the positive sentiment in early May by setting PrNd oxide prices high in anticipation of high demand.
Prices fell in the latter half as orders failed to materialise at levels initially expected and are not expected to increase further in the near-term since the market is well-supplied.
Rare earth permanent magnets (REPMs) are the biggest end use for rare earth oxides such as PrNd and are used mainly in wind turbines and EV motors as well as consumer goods.
How long have rare earths prices been low and what impact is this having?
PrNd ores and oxide prices have plummeted since hitting near-record highs in 2022, when Chinese production increases coincided with weakening growth in demand for REPMs.
Low prices have geopolitical consequences. Western governments rely on a handful of home producers to build capacity and reduce reliance on China for its REPMs and REPM inputs.
Yet prices are far below levels that would incentivise capacity investment at most ex-China producers, including Lynas and MP Materials, the only major rare earths miner-processors in the Western world.
Meanwhile, the Chinese players that dominate the global markets remain resilient. China is set to produce 84% of global PrNd oxide supply in 2024,according to Benchmark’s Rare Earths Forecast, and has a near-monopoly on REPM production.
What are rare earths price trends like now compared to last year?
PrNd prices displayed a slower rate of decline over March and April 2024 compared to the end of 2023 and the start of 2024, raising hopes of market strengthening.
However, demand would have to go up quicker and more consistently for ex-China producers to benefit.
“After a large decrease at the very beginning of 2024, prices are yet to bounce back to support the margins of Western producers,” said Ingall.
Why are low prices hurting Western producers more than Chinese ones?
Western producers tend to be smaller and younger and therefore more likely to be in the capital-intensive stages of their careers. Operating in liberal market economies, they also need high prices to attract investors and support expansions.
By contrast, China’s industry has larger, state-owned players that enjoy cost-lowering economies of scale as well as policies that buffer them from price volatility.
“Through state policy support, China is able to produce REPMs from concentrate that exceed quality in the West at an artificially low price,” Ingall said.
Their large global market share also means influence over price.
“By flooding the market with this low cost concentrate, China is looking to disincentivise ex-China aspirants from entering the market,” said Ingall.
Western governments have recently moved to support REPM and rare earths producers, such as the recently announced 25% import tariff on Chinese REPMs from 2026. Nonetheless, measures like this will not substitute entirely for stronger prices.
Almostall ex-China pipeline PrNd capacityneeds prices above current levels to achieve a 15% profit margin or higher, according to Benchmark data. A further 27% would need prices to reach over twice what they are today
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