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Business / Markets

Increase in rare earth prices will not affect global market, demand

By YANG ZIMAN (China Daily) Updated: 2015-10-29 10:21

The increase in prices by China's largest rare earth miner will not have a material effect on global prices or demand, according to a leading expert on the sector.

China Northern Rare Earth (Group) High-Tech Co Ltd increased the indicative price of praseodymium and neodymium oxides by 10,000 yuan per ton ($1,573) this week, a 4 percent hike. At the close of trading on Wednesday, their average price stood at 257,500 yuan per ton, according to the Shanghai Metals Market.

But Chen Chuandong, a senior researcher from Baotou Research Institute of Rare Earths, insists that supply still outstrips demand, and the biggest issue facing the market is illegal mining.

"Legal companies are still over-producing and illegal supplies are active while demand has been stable. The price hike by China Northern Rare Earth has not become obvious in the global supply and demand chain," said Chen.

Earlier this month, China Northern said market conditions had forced it to cut its output target for the year, as did the country's other five major producers.

The latest industry figures show that the Inner Mongolia autonomous region, China's rare earth production base, registered exports of 2,663.8 tons, a 36.5 percent increase from the same period of last year.

Average export prices, however, have fallen by 34.7 percent year-on-year to 32,000 yuan per ton. According to industry news website Mining.com, recent figures disclosed by the Association of China Rare Earth Industry show that about 90 percent of the nation's rare earth producers are currently operating at a loss.

Although a major rare earth producer and exporter, for a long time China has had little say in setting prices, according to a recent analysis by Shenzhen-based CIConsulting. Too many small competitors, exploiting resources in a wasteful manner, said the report, had caused the price war at a time when demand is sluggish. "A lot of companies in the rare earth industry have been suffering in terms of revenue, after the 17-year export quota was lifted this year, dragging down rare earth prices," said Chen.

"Excess production capacity, lack of regulation on competition and under-priced exports are the three major factors affecting China's vulnerability to price fluctuations."

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