Review of Rare Earth Market in 2021
Jan 17 , 2022
The rare earth market faced great supply challenges on the back of surging demand thanks to the rapidly development sectors including new energy vehicles (NEVs), wind power generation, etc. in 2020-2021, which are the key application fields of rare earth products, fuelled by the global carbon peaking and carbon neutrality goals as well as the upgrading level of consumption and recognition of energy reservation and emission reduction. The NdFeB magnetic materials manufacturers in the upstream have been actively expanding their capacities to answer the market needs.
Throughout 2021, the annual rare earth mining and smelting quotas rose 20% on the year to 168,000 mt and 162,000 mt respectively, while the upstream supplies of rare earth oxide and alloy were still unable to meet the expanding NdFeB magnetic materials capacity as well as the terminal applications. Taking praseodymium neodymium (PrN) as an example, the domestic demand for rough NdFeB exceeded 200,000 mt in 2021, equalling to a demand of over 80,000 mt of PrNd oxide. However, the total PrNd oxide capacity stood only at 70,000 mt in the same year, leaving a palpable supply gap. Hence, the mainstream rare earth products prices rose as whole in 2021 amid obvious supply shortage.
The rare earth products prices rose significantly int he first quarter of 2021. The prices of PrNd oxide rose from 411,000 yuan/mt to 585,000 yuan/mt, an increase of 42%. Terbium oxide prices climbed from 7.4 million yuan/mt to 9.7 million yuan/m, an increase of 31%. The prices of dysprosium oxide also recorded significant gains of around 56.6%, rising surging from 1.96 million yuan/mt to 3.07 million yuan/mt. The manufacturers basically resumed their production when the COVID-19 pandemic control became the new normal in this period. The downstream demand grew by the end of February and early March as the industry participants returned to work after the Chinese New Year holiday, boosting mainstream rare earth products prices.
Then there came the seasonal low in Q2, when the prices dropped on the whole. On the supply side, the downstream demand dropped as it was the traditional off-season. On the supply side, the light rare earth mining activities yielded output in April and May, and the upstream separation companies took the opportunity to expand their production as the quotas were relatively abundant at the beginning of the year. The PrNd oxide output rose 17.2% MoM in May. The supplies of rare earth oxide and alloy were high throughout the year, and the market was in a transitory oversupply. During this period, the prices of PrNd oxide dropped from 585,000 yuan/mt to 476,000 yuan/mt, down 18.6%. Terbium oxide prices recorded a lost of 18.6% from 9.7 million yuan/mt to 6.3 million yuan/mt. The prices of dysprosium oxide fell from 3.07 million yuan/mt to 2.35 million yuan/mt, a decrease of 23.5%.
In the third quarter, the market prices rose first and then remained congested. Affected by the pandemic, the China-Myanmar border was closed since July, and expectation of tigher rare earth supply was heightened, which boosted the bullish sentiment. As such, the prices of mainstream rare earth products rose significantly in July. The prices of PrNd oxide increased from 482,000 yuan/mt to 625,000 yuan/mt, up 30%. Terbium oxide prices climbed from 6.5 million yuan/mt to 8.4 million yuan/mt, a palpable increase of 29%. Dysprosium oxide prices also managed a gain of 11.8% from 2.37 million yuan/mt to 2.65 million yuan/mt. In the following two months, the news of customs closure was gradually digested by the market, and the prices of mainstream rare earth products stood congested in a muted makret.
In the last quarter of 2021, the prices soared to the highest in the year from October to November. The prices of PrNd oxide rose from 600,000 yuan/mt to 860,000 yuan/mt, a significant gain of 43%. The prices of terbium oxide rose above 10 million yuan/mt from a low of 8.9 million yuan/mt to 12.5 million yuan/mt, an increase of 40.4 %. Dysprosium oxide prices also managed to climb though modestly compared with other products, which rose from 2.72 million yuan/mt to 2.95 million yuan/mt, up 8%.
On the demand side, the restocking demand was high both in China and overseas in October-November due to the Christmas holiday as well as the vibrant downstream sector in China. The market later turned wait and see in December as most manufacturers were about to close their long-term contracts. On the other hand, the market participants faced greater financial pressures around the year-end, and were busy managing their annual income statement. The high raw materials prices also suppressed the downstream demand.
On the supply side, affected by the shortage of thermal coal supply, the electricity restrictions intensified in south China in October, the operating rates of upstream rare earth separation enterprises and metal enterprises decreased, resulting in less supply of mainstream rare earth products such as PrNd, dysprosium and terbium. In addition, the stocks of rare earth ores stored at the beginning of the year were gradually exhausted, and the supply side did not see any replenishments since July when the ore imports from Myanmar were disrupted by the COVID-19 pandemic. The supply gap of domestic rare earth ores expanded further in the fourth quarter.
The rising downstream demand and tightening upstream supply aggravated the gap between the two. The prices of mainstream rare earth products surged on the back of rising costs when the auxiliary materials prices rose on power rationing in south China in Q3. PrNd oxide and alloy prices both recorded the yearly high at 860,000 yuan/mt and 12.5 million yuan/mt respectively in 2021.
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