Rare Earth Prices to Remain Boil After Sharp Rise

Rare earth prices needed for electric vehicles will continue to soar this year due to strong sales of electric vehicles, uncertainty about supply from Myanmar, and scarce stocks.

Prices of rare earth have hit a ten-year high, with the China Rare Earth Price Index reaching 425.9 as of last Wednesday, and it remains at a high level, according to the China Rare Earth Industry Association.

High rare earth prices reflect booming demand from downstream industries, including new energy vehicles (NEVs) and wind power. Rare earth stocks were on the rise last Wednesday, with some large companies such as Zhejiang Skyworth Magnetics up 8.38% and China Minmetals Rare Earths up 5.44%.

Industry analysts predict that prices will remain high for some time given tight supply and strong demand, a post-Chinese New Year economic rebound and policies that have spurred price increases.

Chinese prices for praseodymium alloys, used to make super-strong magnets in electric vehicle motors, doubled last year and have soared more than 10 percent to 1.17 million yuan ($184,072) per ton so far in 2022.

China's Ministry of Industry met with automakers and battery companies last month to discuss the spike in rare earth prices. "The situation is as tight as it's ever been," said Ryan Castilloux of consultancy Adamas Intelligence.

"The demand in this industry gets stronger month after month." The consulting firm declined to give specific price forecasts because of their volatility.

China is the world's leading producer of rare earths, a group of 17 minerals used in electric vehicles, wind turbines, and military equipment, but relies on Myanmar for about half of its heavy rare earths feedstock.

Its rare earth imports from Myanmar dried up for months last year after a key border crossing was closed to control the spread of a new coronavirus. Analysts say the border reopened in late November, but political instability in Myanmar after a military coup last year has added to supply uncertainty.

Consultant Castilloux said, "Permanent magnets made of rare earths are used in most of the motors that power electric vehicles, and sales in the industry are booming as automakers seek to reduce carbon emissions."

According to the International Energy Agency, global sales of electric vehicles more than doubled to 6.6 million units in 2021, more than tripling their market share from two years ago.

Gary Gao of data provider Shanghai Metals Market said they expect rare earth prices to remain strong until at least 2025. (Chinese) policymakers said in a webinar, "The current price of REE (rare earth element) oxides is somewhat undervalued."

In recognition of the strong demand, China increased its first domestic rare earth ore production quota by 20% for 2022.

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