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 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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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 latest survey indicated declines in prices for most rare earth products last week.

Prices were RMB 34,000/mt for lanthanum oxide, RMB 36,500/mt for cerium oxide, RMB 367,500/mt for praseodymium oxide, RMB 325,000/mt for neodymium oxide, RMB 287,500/mt for didymium oxide, RMB 4,850/kg for europium oxide, RMB 1,775/kg for dysprosium oxide, RMB 131,000/mt for gadolinium oxide, RMB 65,500/mt for cerium misch metal, RMB 387,500/mt for praseodymium-neodymium alloy and RMB 1,825,000 mt for dysprosium-iron alloy.

Demand for rare earth products remained depressed, with some cargo holders cutting prices for sales. Many producers have yet to resume production as orders remained poor in early April. Operating rates at rare earth smelters also remained low, and some of them only produced semi-finished products to push down costs.

We expects rare earth prices to fall further this week given strong bearishness among market players.
 

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