The joint study group of Yamaguchi University, Ehime University and University of Tokyo released a report on April 2nd saying they had discovered a new mineral that contains rare earth.

Japan is confirmed to have massive high concentration rare earth reserves in seas around Minami-Tori Shima. Japan believes these resources will not run out in 230 years, and the grade of rare earth is about 20 times higher than China's.

Japan has been importing rare earth from China, while China supplies 90% rare earth to the world. But the situation may change. Japan's rare earth reserves is 10 times more than China's, which can be used for hundreds of years. According to Lin Boqiang, Director of Energy Economy Research Center of Xiamen University, the discovery in Japan is in line with China implementing rare earth export quotas.


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Rare earth prices have been falling since the start of 2013. Praseodymium-neodymium alloy prices rallied early this year, but transactions were muted, with prices stabilizing between RMB 400,000-405,000/mt, up RMB 15,000/mt from last year’s end. Prices for other rare earth categories maintained downward track.

In 1Q, prices for lanthanum oxide and cerium oxide dropped most steeply. SMM quotes for lanthanum oxide in late March were RMB 33,000-35,000/mt, while SMM quotes for cerium oxide were RMB 38,000-40,000/mt, down 34% and 22.4% respectively from the end of 2012.

In fact, rare earth prices have been weakening after the Chinese New Year holiday, with quotes for lanthanum oxide and cerium oxide leading decreases. Dysprosium oxide and dysprosium ferroalloy also fell. Transactions were muted, with most cargo holders standing on the sidelines.

According to Chen Quanxun, President of the China Nonferrous Metals Industry Association, the rare earth industry has been in severe oversupply, with the capacity utilization rate below 40%.

According to annual reports of listed companies, net profits at Inner Mongolia Baotou Steel Rare-earth (Group) Hi-tech Company last year were RMB 1.51 billion, down 56.57% YoY.


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Capacity utilization rate at the rare earth industry fell short of 40%. According to China Nonferrous Metals Industry Association President Chen Quanxun, rare earth overcapacity is very severe, with capacity utilization rate below 40%.

Chen Quanxun said capacity of aluminum, industrial silicon and rare earth has been in oversupply. The capacity utilization rate of industrial silicon was less than 30%, with capacity utilization rate of aluminum reaching 80%.

 "Capacity surplus of industrial silicon and rare earth is very significant." Said Chen Quanxun, "The most effective measure to ease capacity surplus is to expand utilization fields."

But China is weak in rare earth utilization, such as rare earth permanent magnetic material, fluorescent material and catalyst. High-end rare earth permanent magnetic materials are mainly produced by Japan, while only several enterprises including Zhongke Sanhuan, Ningbo Yunsheng and Advanced Technology & Materials Co., Ltd (AT&M) produce high-end rare earth permanent magnetic materials in China.

Many domestic enterprises mainly engage in low-end ferrite magnets production, and fierce market competition and high rare earth costs forced them to reduce rare earth utilization or even suspend production. In this context, the capacity utilization rate of rare earth fell short of 40%.

Annual earnings of rare earth enterprises in 2012 slid across the board. Rare earth exploration and separation are most profitable of the industry chain. Rare earth prices dropped sharply in 2012, and upstream profits were also down. Inner Mongolia Baotou Steel Rare-earth (Group) Hi-tech Company ordered its upstream companies in north China to suspend production for three months. According to the company's annual report, net profits in 2012 were RMB 1.51 billion, down 56% from RMB 3.478 billion in 2011. The company reported with high inventories at hand, their cash flows were much lower than annual net profits.


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 A major rare earth production corporation has been formed in east China's Jiangxi Province as part of efforts to boost the industry's sustainable development.

The state-owned Ganzhou Rare Earth Group Co., Ltd., based in the city of Ganzhou, was founded through the merging of its key subsidiary Ganzhou Rare Earth Mineral Industry Co., Ltd. and some local rare earth companies, including Longnan Wanbao Rare Earth Co.

Thirty-six percent of China's middle and heavy rare earth reserves are in Ganzhou, which has experienced overexploitation since the end of the 1970s.

"From now on, Ganzhou will step up efforts to facilitate the merging and restructuring of the rare earth industry," said Liu Jianping, vice mayor of Ganzhou.

As the only prospector in Ganzhou,the group will be involved in rare earth mining, smelting, processing and trade.

In 2012, the sales revenues of the rare earth industry in Ganzhou reached 34 billion yuan (about 5.44 billion U.S. dollars), acccounting for one-third of the industry's revenues nationwide, according to Ma Rongzhang, secretary-general of the China Rare Earth Industry Association.

As the world's largest rare earth supplier, China serves more than 90 percent of global demand for rare earth metals, a group of 17 elements that are necessary to manufacture high-tech products ranging from flatscreen TVs to lasers and hybrid cars.

However, the country holds only 23 percent of the world's rare earth reserves. Decades of excessive exploitation have greatly damaged the environment.

In January, the Ministry of Industry and Information Technology (MIIT), along with 11 other authorities, said in a guideline that the government is encouraging mergers in the auto, steel, cement, shipbuilding, electrolytic aluminum, rare earth, electronic information, pharmaceutical and agriculture sectors.

The government will slash the number of rare earth companies through mergers and concentrate production capacity, the guideline says.

China's top rare earth producer, the Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co., announced last December that it would gain control of another 12 rare earth companies in order to form a megacompany.


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