Rare Earths: Chinese Rare Earth prices continue their rise in July after a strong June performance

Prices for certain rare earths continued to increase in Baotou during the first week of July, with Pr-Nd oxide prices increasing by RMB5,000/t to RMB330,000-350,000/t, Nd-Pr metal increasing by RMB5,000/t to 430,000-435,000/t and Pr oxide increasing by RMB10,000/t to RMB405,000-410,000/t. The July increase comes after prices for Nd-Pr oxide increased by over 8% in June 2017 and the price of Nd-Pr metal increased by over 10% during the same period.

After enduring a sustained period of falling prices, the increase in rare earth prices since late 2016 and the use of REE bearing components in hybrid and electric vehicles has brought renewed interest to the rare earths industry. The price increases in China have been attributed to multiple factors, including on-going environmental inspections which have caused some processing plants to suspend production, reducing official supply availability. The announcement of up-coming REE purchases by the Chinese State Reserve Bureau has also increased prices as material is removed from the spot market. Reported REE prices by major producers China North Rare Earth Group and China South Rare Earth Group have helped support prices increase during 2017, though actual trade prices often fall below those reported by producers. 

Supply availability from official sources in China has been reduced by environmental inspections, industry consolidation and stockpiling, though illegal production continues to form a significant portion of supply. This is despite continued efforts by the Chinese government to regulate the industry and increase its control of rare earth mining and processing. A reduction in official supply availability may result in an increased reliance of consumers on illegal raw materials sources, which could become more pronounced if prices continue to rise. This could further reduce the Chinese governments control over supply, price movements and environmental damage caused during extraction and processing if the illegal REE supply chain is not tackled effectively.