Rare earth price outlook darkens as China struggles to curb supplies
Rare earth prices seem to be decisively on the slide, weighed down by a combination of supply factors and possibly slowing economic growth in China and elsewhere.
There are an increasing number of reports that a possible new invoicing system to be introduced by the Chinese authorities aimed at rare earth producers and would likely exclude smaller players is seeing a sell-off in material by those likely to be cut out.
This appears to be overwhelming other efforts to support prices, such as the country’s largest rare earth producer halting production for a month and increasingly virulent efforts by the Chinese authorities to stamp out illegal production and exports. Indeed, Europe seems to be awash with smuggled material at the moment, especially cerium oxide, which is seeing prices trade way below official Chinese ones and are weakening further.
On the other hand, in China, the pace of economic growth is slowing. The latest evidence comes in the form of China’s Purchasing Managers’s Index, which fell 0.8 percentage points in October from September to 50.4 %. A figure above 50% suggests expansion. Slower manufacturing output would likely translate into lower demand for rare earths – unless manufacturers take advantage of lower prices to stock up.
One of the reasons for that slowdown is apparently linked to the seemingly unresolvable Eurozone crisis and with the continent’s largest economy, Germany, in the grips of a slowdown as well. Nonetheless, there has been some pick-up in demand in Europe for a range of rare earths with buyers taking advantage of cheaper prices and possibly simply needing to replenish depleted stocks.
There’s some speculation that Japanese buying could pick up as well for rare earth elements such as neodymium.
It’s unclear whether this will be enough to support prices in the short term, but China’s determination not to see its rare earths squandered and to steadily reduce supply shouldn’t be underestimated either.
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