Global demand for rare earth metals from China climbed in the first quarter due to falling prices despite domestic producers and processors reporting losses.

Statistics from the General Administration of Customs suggest that rare earth exports rose 55 percent in March from February to 1,718 metric tons.
 
Export volume in the first three months grew 47.3 percent to 3,916 tons. But in the same period, export value dropped 71 percent to $91.9 million.
 
Deputy Secretary-General of the China Rare Earths Industry Association Chen Zhanheng said the growth in exports volume stems from a price decline in 2011, stimulating overseas buyers who had used up their reserves. Chen said there are no signs of a quick rebound from falling demand at home and abroad, but he believes the market will grow as production is being regulated and prices continue to fall.
 
Chen Jiazuo, an analyst from the China Nonferrous Metals Information Network, said it only took two years for the industry to deteriorate from its peak, yet current prices are still higher than the lowest point in the past 10 years.
 
Only half of the export quota in 2012 was used due to the price surge in 2011, which deterred buyers. The value of exports in 2012 fell 66.1 percent year-on-year to $906 million.
 
Rare earths, which comprise 17 metallic elements, are used in many technological products, including missile systems.
 
China supplies more than 90 percent of the world's rare earths, and has nearly one-third of the known global reserves.
 
In the first quarter, Baotou Steel Rare-Earth (Group) Hi-Tech, the country's largest rare earth producer, reported revenue of 2.29 billion yuan ($366 million), down 35.7 percent from a year ago. Its net profit fell 79.7 percent to 245 million yuan. Its first quarter report said prices for its main products have dropped more than 50 percent.
 
Last year, the firm saw a sharp drop in net profit and revenue due to falling demand and a slowing economy.
 
Net profit dropped 56 percent to 1.51 billion yuan year-on-year, while revenue fell 19 percent to 9.24 billion yuan as a result of low demand in the rare earth market and a price drop.
 
Baotou Steel resumed production on Feb 23 after a four-month halt due to the price slump. Another producer, Rising Nonferrous Metals Co Ltd, saw a first quarter loss of 29 million yuan due to a drop in operating revenue and gross profit.
 
Last month, China Minmetals Rare Earth Co Ltd announced a 47 percent drop in revenue, from 7.6 billion yuan in 2011, with net profit falling 74 percent in 2011.
 
Many downstream enterprises are suffering due to the price surge in 2011, with some closing their operations, Chen said. Rising prices have forced many manufacturers to switch to other materials or seek new markets for rare earths, he said.
 

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The Association of China Rare Earth Industry held its second session of the First Member and Director Meeting on April 21st, 2013 in Shanghai, with the Ministry of Industry and Information Technology Vice President Su Bo attending the meeting and speaking.

Su Bo pointed out with joint endeavor of the State Council, local governments, industry association and rare earth enterprises, the target of “establishing standardized orders for rare earth exploration, smelting and separation and market trading, and building an unified, regular and efficient management system for the rare earth industry in 1-2 years” set in the Proposals Regarding Promoting Sustainable and Healthy Development of the Rare Earth Industry promulgated by the State Council in 2011 was generally achieved. The rare earth industry maintains prosperous development, which is mirrored in enhanced management, standardized industry orders, improving operation quality and rising consolidation rate.

Su Bo emphasized that rare earth consumption will grow further in the foreseeable future as global technology advances and strategic emerging industries develop rapidly, and medium-to-heavy rare earth supply will tighten, with international competitions of preliminary rare earth products becoming fiercer. The execution of the Proposals Regarding Promoting Sustainable and Healthy Development of the Rare Earth Industry has entered a crucial stage, focusing emphasis on accelerating industry policy adjustments and standardizing industry management work. The rare earth industry put its emphasis on accelerating construction of large rare earth groups, cracking down on illegal operation, pushing high-end technology researching and industrialization and enhancing construction of regulations and rules this year.

Su Bo also hopes that the Association of China Rare Earth Industry will enhance self-construction, increasing serving ability, and prompting its member enterprises to execute national policies.


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Inner Mongolia exported 800.3 mt of rare earth in Q1, up 2.4 times from the same period last year.

Rare earth exports in Inner Mongolia have been growing since the starts of the year, with a high of 307.6 mt in March. 800.3 mt of rare earth was exported through general trade, up 2.4 times from the same period last year. Rare earth exports to private and state-owned enterprises were 376.6 mt and 303.6 mt, respectively, with the volume in private enterprises up 38.2 times YoY; above 80% exports were made to US and Japan.


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Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Company released its Q1 earnings report on April 19. Net profits of listed shareholders in Q1 were RMB 245 million, down 79.68% YoY, with profits of RMB 0.101/share.

The company realized business income of RMB 2.296 billion in Q1, down 35.69% YoY. The company attributes the declines to falling rare earth product sales and traded prices on the YoY basis.
　
With regard to the nearly 80% declines in net profits, the company reported that is because of falling rare earth price and sales, as well as rising costs.
 

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Research and Markets has announced the addition of the "China Rare Earth Industry Report, 2012-2015" report to their offering.

As the world's major rare earth country, China occupies 50% of the total global rare earth reserves, but also provides about 90% of the global rare earth products every year. In order to protect rare earth resources, it has promulgated a number of policies over the years to limit over-exploitation and export of rare earth, including mining license control, total quantity control, export quotas, special invoice system, etc., whose implementation has caused supply decrease and price increase as far as Chinese rare earth products are concerned.

In China, rare earth consumption can be divided into traditional field and new material field, of which, the former covers metallurgy / machinery, petroleum / chemicals, glass / ceramics, agriculture / light industry / textile, etc., and the latter mainly refers to permanent magnet materials, luminescent materials, polishing materials and hydrogen storage materials. In recent years, driven by downstream demand, the new material field has witnessed rising consumption of rare earth. It is expected that in 2015, the demand for rare earth from new materials will account for 79.8% of the total, of which, magnetic materials will show the largest of 61.3%.

Key Topics Covered
1. Overview of Rare Earth Industry
2. Development Environment of China's Rare Earth Industry 2.1 Global Rare Earth Industry Development 2.2 China's Rare Earth Industry Policy Adjustment
3. China's Rare Earth Industry Development 3.1 Reserves and Distribution 3.2 Development in Major Regions
4. China's Rare Earth Industry Market Supply and Demand 4.1 Supply & Demand 4.2 Export 4.3 Market Price
5. Application of Rare Earth Metals 5.1 Application Structure 5.2 Magnetic Materials 5.3 Hydrogen Storage Material 5.4 Polishing Material 5.5 Luminescent Material
6. Major Rare Earth Enterprises of China
7. Major Rare Earth New Material Enterprises of China
 

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Hastings Rare Metals (ASX: HAS) is in preliminary discussions with a number of parties interested in assisting funding development of its advanced Hastings Rare Earths Project in Western Australia.

The company is investigating a number of options including a strategic alliance, off-take agreements and joint venture proposals.

The Hastings deposit contains predominantly heavy rare earths (85%), such as dysprosium and yttrium, which are substantially more valuable than the more common light rare earths.

“We are particularly excited about the Hastings Project as we progressively achieve the milestones needed to get through feasibility,” technical director Steve Mackowski said.

Work is in progress on further purification to get the individual products such as Niobium and Zirconium to saleable quality.

This will build on Hastings achieving in late 2012 separation between the rare metals, Niobium and Zirconium, the rare earths, and the waste materials in a modified solvent extraction circuit that delivered superior results to those obtained in 1990.

“The medium term market in 2016 and onwards is very positive for heavy rare earths. The supply side is constrained and the demand side is growing rapidly especially for the Hastings’ heavy rare earth product suite,” Mackowski added.

“There is an opportunity for end users to lock in their supply needs and guarantee their long term hi-tech futures. We look forward to helping these hi-tech end users build and maintain the supply chains that will be needed to ensure a better, greener, more energy efficient future.

“It was also pleasing to get recognition of the Hastings rare earth project, as one of the four key rare earths projects in Australia, by one of the REO world’s leading commentators, Jack Lifton. This is a reflection on the resource quality and the development team responsible for the project’s progress.”


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A feasibility study on the Nechalacho rare earth elements (REE) project in North America has estimated a C$1.45 billion (US$1.41 billion) upfront capital cost for a mine and refinery.
 
The study assessed the construction of the underground mine, concentrator and hydrometallurgical plant located in Canada’s Northwest Territories, and a C$404 million rare earth refinery in Geismar, Louisiana.
 
The report was prepared for the project’s owner, Avalon Rare Metals Inc by SNC-Lavalin.
 
Over a 20-year mine life, the mine would process 730,000t/y at a cost of C$362.28/t mined to produce 24,712t of enriched zirconium concentrate and 6,810t of separated rare earth oxides.
 
Avalon’s president and chief executive, Don Bubar said: “With the feasibility study in hand, we can now accelerate the process of securing commitments on future product sales and attracting financial partners to participate in the further development of the Project."


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Lynas Corporation Ltd expects demand for its rare earths products to grow over the medium term after beginning production of its first separated rare earths products in Kuantan in the March quarter.

The Lynas Advanced Materials Plant (LAMP) in Malaysia has now produced a full suite of rare earths products and is ramping up towards a capacity of 11,000 tonnes a year by the end of the second quarter of 2013, Lynas said in a statement.

The Federal Court of Malaysia last month backed earlier lower-court decisions that dismissed a challenge by environmentalists opposing the company's rare earths refinery in Kuantan.

In its March quarter report, Lynas reiterated its production guidance and said it had appointed Eric Noyrez as chief executive officer at the end of last month.

The company said prices fell 13 per cent compared with the previous quarter, achieving an average Mount Weld basket price of US$37.22 per kg in the first quarter.

At the end of the quarter, 15,593 dry tonnes of concentrate containing 5,540 tonnes of rare earths oxides (REO) were bagged ready for export.

"Lynas has projected rare earths demand to grow at above-GDP rates over the medium term, driven by increases in demand from key sectors such as rare earths permanent magnets, autocatalysts and fluid cracking catalysts," Lynas said.

These three markets are expected to account for around half of global rare earths demand by 2015.

Total costs for projects remain unchanged for the quarter.

By the end of the decade, Lynas predicts supply shortages in some rare earths element markets such as Neodymium/Praesodymium and Lanthanum.

Total staff at the Malaysian site fell to 1,515 at end March, down from 2,300 in mid-December 2012 as the project nears completion.


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The global rare earth industry is experiencing rare earth prices deterioration which has exacerbated declines in revenues, earnings and share prices of junior minors. Molycorp (MCP), with its heavy concentration of light rare earths ("LREE"), experienced price declines of 30% quarter-over-quarter. The price deterioration does not seem to be abating anytime soon. According to the Motley Fool, it's a wonder that some junior minors are even still in business:

The price of common rare-earth minerals has been dropping since 2011, the year rare earth prices peaked, which is why revenue is slipping. It's a wonder at this point that miners without production, like Rare Element Resources (REE) and Avalon Rare Metals (AVL), are still in business at all. If Molycorp can't make money now that it's in full production, then how could there be enough demand to support all of these companies?

And with new developments such as the vast rare earth oxides found in the Pacific seaboard by Japan last week and in Jamaican mud in January, the supply/demand dynamics may drive prices lower in the future.

Here is an update of junior minors' trading multiples since our last comparable rare earth industry analysis, which includes Molycorp, Lynas Corporation (LYSDY.PK), Avalon, Rare Element, Arafura Resources (ARAFF.PK), Quest Rare Metals (QRM), Great Western Minerals (GWMGF.PK), Montero Mining & Exploration (MXTRF.OB), Frontier Rare Earths (FREFF.PK), Tasman (TAS), Ucore ( ) Hudson Resources (HUDRF.PK), and Matamec Explorations (MHREF.OB).
 

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The utilization rate of China's rare earth export quotas fell from 52.01% in 2011, to 48.75% in 2012 due to sluggish demand.

As rare earth supplying countries increased, rare earth prices should fall slightly further this year.

According to an analyst Chen Jiazuo, China's rare earth prices will generally fall throughout 2013.

Investments in rare earth grew as China is attempting to gain more negotiating power over pricing, which caused prices to fluctuate.

China's domestic consumption grew 7% MoM.

China has executed export quotas for rare earth since 2006, and prices had been rising. But the global financial crisis which occurred in 2008 pushed down rare earth prices again.

In order to stimulate economy, China began to implement stimulus policies, causing rare earth prices to climb in 2010, and were pushed up to a near-year-high in July 2011 by speculation capital.

But due to high prices, sluggish global economy and low demand, rare earth price index plunged from 15, to 5-6, and had been falling since then.

Chen Jiazuo reported China will continue to implement exploration quantity and separated products production plan for rare earth in 2013, with total volumes flat with 2012, and rare earth prices will fall further, which will given incentive to downstream consumption. China's rare earth consumption in 2013 should reach 90,000 mt, up 7% MoM; global total rare earth consumption is expected to be 130,000 mt.

China's total rare earth exploration volume planned in 2012 was 93,800 mt, with consumption of 84,000 mt.

                       

Exploration of Other Suppliers

China has 23% of rare earth in global total volume, and supplies 90% of rare earth to the world. Due to high price and expensive costs, US, Europe and Japan began to seek for other suppliers outside China, and actively explore substitute products for rare earth.

The most influential explorations are the Mountain Pass mine by Molycop and Weld mine by Lynas

China will continue to implement rare earth export regulations in 2013, with export quotas level with 2012. In 2012, China's export quotas for rare earth were 30,966 mt.

China's utilization rates of rare earth export quotas 2011 and 2012 were 52.01% and 48.75%, respectively, due to soft demand.
　　
As global rare earth supply increased, rare earth prices should fall slightly in 2013.
 

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