Chinese Giants join Efforts to Push HREE Prices Higher

There is an oversupply of rare earths in China’s market at present. However, China’s main REE producers have tried to keep the HREE offer price high, especially during the past month. On November 21, 2012, Baotou Steel Rare Earth (IMBREHT) said it would halt production for another month, even as it set a new REE price on the same day; as an example, the price of Neodymium-praseodymium oxide, a key rare earth mineral, was priced at 450,000 Yuan per ton while Dysprosium oxide rose to 3,850 Yuan per kilogram, according to the listings on their website. Meanwhile, on November 23, 2012, CMC Rare Earth Group announced they had also updated their HREE prices, which reached the highest level since the latest round of stockpiling began; the price of Neodymium-praseodymium oxide rose to 500,000 Yuan per ton, Dysprosium oxide rise for 4000 Yuan per kilogram.

This latest rise in the prices of China’s HREE products can be blamed on many of China’s largest producers, including Baotou Steel Rare Earth (IMBREHT), Aluminum Corporation of China (Chalco), China Minmetals Corporation (CMC) and China Nonferrous Metal Mining Group (CNMC). Together, they not only decided to suspend the production of their smelting and separation subsidiaries but also to stockpile HREE at much higher purchase prices than the current market price.

In fact, Chinese HREE prices started to rise on November 2, 2012; it was also the first price rise in the past few months. On that same day, IMBREHT, China’s largest light rare earth producer started to purchase and stockpile Praseodymium-Neodymium Oxide from the market. On November 8, 2012, China’s largest HREE producer, CMC Rare Earth Group announced that it had purchased and started to stockpile HREE’s from the market. On November 13, 2012, IMBREHT announced that it would start raising its rare earth prices again. On November 19, NFC Rare Earth (owned by CNMC) another HREE giant, also announced it was planning to purchase and stockpile HREE’s. This suggests that Chinese rare earth companies have cooperated, or colluded, to provoke an HREE price recovery in an effort to stabilize domestic market prices.                       

The latest Chinese REE’s price increases complement the Central Government’s rare earth policy. Illegal mining and smelting have also affected China’s REE prices. On October 12, 2012, China’s Ministry of Industry and Information Technology (MIIT) announced plans that it would be taking immediate action to crack down all legal and regulatory violations. According to the Chinese Rare Earth Industry Association (ACREI) on November 14, the Chinese government’s efforts curb illegal rare earth supplies have resulted in the government, confiscating more than 20,000 tons of rare earth oxides (REO) and shutting down six illegal smelting factories to close in Inner Mongolia Autonomous Region and Gansu Province. An MIIT official said, last Thursday, that the Chinese government would take more stringent supervisory measures to crack down on illegal rare earth production, curb rare earth smuggling and clean up its rare earths industry. Part of its plans includes the potential establishment of a new local accountability system for administrative senior regional officers to promote the conservation of rare earth resources and to ensure stringent environmental standards are met. “The Measures for the Management of the Special Fund for the Adjustments and Upgrades of Rare Earths Industry” was published by the Ministry of Finance (MOF) and MIIT on November 21, 2012. The money will be used to fund local governments’ crackdown on illegal mining, the upgrading of facilities’ environmental standards, research and development and high-tech applications.

The provision of a special fund for the rare earth industry will promote effective demand of rare earth elements applications. The crackdown of illegal rare earth productions and the adoption of controls on rare earth smuggling will change the oversupply of rare earth. The price increases being prompted by China’s largest producers will help to support higher market prices. If China’s central government can succeed in controlling illegal rare earth production while curbing rare earth smuggling, prices of rare earths in China will continue to rise.