In a major blow to high-end consumers, the prices of rare earth minerals have almost doubled in the second quarter of the current calendar year from the first quarter, mainly on account of various restrictions imposed by the Chinese government.
Rare earth minerals are used extensively for manufacturing plasma televisions, smartphones and energy-saving light bulbs, among a growing number of items. Almost the entire world supply comes from China.
The average price of europium oxide, for example, has risen by 155 per cent to $1,850 a kg in the second quarter of this year from $725 a kg in the first quarter. In the past three years, the commodity’s price has quadrupled from $425 a kg in the first quarter of 2008.
Similarly, lanthanum oxide has almost doubled to average at $140 a kg from $75 a kg in the period under consideration. The price has surged nearly 13 times in the past three years. Another rare earth element dysprosium oxide, used in magnets, lasers and nuclear reactors, has risen from $700-740 a kg to trade currently at $1,470 a kg.
In 2008, China suspended shipments of these minerals to numerous destinations worldwide. Its quota for export are being reduced. With this supply decline, prices have surged through 2010-11. Mining companies involved in rare earths worldwide are finally responding to the rise in prices by making significant investments in long-term operations. Australia, South Africa, Alaska, Canada and Sweden are reported to have the leading mines globally in terms of quality, outside of China. There are a little over 200 non-Chinese rare earth projects under evaluation.
The estimated volume of the rare earths oxides (REO) market in 2010 was 125,000 tonnes, with an estimated value of about $4-6 billion. China supplied 95 per cent of global demand and consumed 58 per cent of the supply. Current world reserves of rare earths, as assessed by the US Geological Survey, are estimated to be about 110 million tonnes of REO.
The production of rare earth minerals outside China is likely to increase 10-fold to 40,000 -60,000 tonnes per annum by 2015 from 4,000-6,000 tonnes now. The indicative demand by 2020 is about 240,000-280,000 tonnes.
Chinese rare earth minerals export prices (FoB China, $/kg)
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The Indian government has also stepped up efforts to boost domestic production. It has allotted Rs 160 crore to Indian Rare Earths Ltd (IRE) to produce the hi-tech minerals at a plant in Orissa, which had been closed in 2004 in the face of cheaper competition from China. Also, several companies are getting into rare earth production in India. Meanwhile, for Indian consumers, the prices of end-products are likely to rise.
“The growing demand for rare earths in domestic and international markets has opened up numerous opportunities for Indian mining companies in this domain, which in turn would be a boon for the Indian economy. China has been extensively catering to global demand for rare earths across application avenues, but it's time for the rest of the world to take initiatives towards meeting this increased demand,” said Kiran Mehta, chairman and managing director, Varun Industries Ltd.