keywords :
Prices for rare earths sank to their lowest
since late 2020 this week as soft demand from green energy companies and the
automotive sector combined with rising supply from top producer China, analysts
said on Thursday.
Concerns have grown that China could
further restrict exports of the strategic minerals after it limited exports of
germanium and gallium late last month.
But the sharp drop in prices reflects a
weak patch in demand and plentiful supply, as China acts to shore up its
dominance in the market, analysts said.
“The demand side has not been super strong
and the key weakness has been wind turbine installations,” said analyst Dan
Morgan of Barrenjoey in Sydney.
“If you’ve got 90% market share of magnet
processing capacity, there’s a goldilocks price where you earn a return but you
don’t encourage anyone in the rest of the world to build capacity,” he added.
Rare earths are a group of metals whose
strong magnetic properties make them critical to sectors including electric
vehicles and defence because of the energy efficiencies they allow.
Prices for Praseodymium Neodymium alloy in
China fell to $73.50 a kilogram this week, the lowest since November 2020, and
down by more than two-thirds since January last year when they topped out at
decade highs of $220.
Around a quarter of demand is each for
electric vehicles, traditional combustion engine vehicles, wind farms
installation and the rest in a range of industrial uses such as elevators or in
defence, according to Barrenjoey.
While electric vehicle growth has been
steady, the market for traditional combustion engines is suffering from global
macroeconomic headwinds.
Global automotive sales is expected to rise
year-on-year but is still below pre-pandemic levels, industry analysts have
said. Top consumer China’s sales fell in June.
New wind power capacity globally in 2022
was 77.6 gigawatts (GW), down from 93.6 GW in 2021, data in annual reports by
the Global Wind Energy Council showed.
Part of the reason China is able to
maintain its dominant position is because it offers a 13% rebate to magnet
manufacturers on export, said analyst Ross Embleton of Wood Mackenzie in
London.
“This just means that China is
automatically at a cost advantage in comparison to other producers around the
world. So it makes it really difficult for people to compete,” he added.
“China has a global influence on pricing
and it certainly uses that ability to taper the rest of world development
because not everybody is economic $60-$70 a kilo.”
Prices had surged since 2020 as a result of
Covid-related lockdowns and in particular a border closure with Myanmar, which
supplies China with much of its heavy rare earth feed stock he added.
Since then, China has made efforts to
normalise the supply chain and free flow of rare earth magnets, improving
supply.
China set a quota for the first batch of
rare-earth mining in 2023 at 120,000 tons in March, up by about 20% compared
with last year while its exports of rare earths in June jumped to the highest in
more than three years, official data showed.
However, any restrictions on rare earth
exports were unlikely given China was not likely to want to disrupt the
“incredibly lucrative” business and further inflame delicate geopolitical ties,
he added.