Rare earth prices surge on supply concerns

Prices of heavy rare earth elements (REE) used in products like energy-saving light bulbs, plasma TVs, and smart phones, have more than doubled in the last two weeks following fears of supply restrictions by China, the world’s largest producer of rare earths.

Data collated by the Canada-based industry publication Industrial Mineral showed the price of europium oxide has risen a staggering 142 per cent during the last fortnight from $1,260-$1,300 a kg to $3,400 a kg. The sudden spurt in price of europium oxide is likely to affect manufacturers of these consumer durables.

Another rare earth element, dysprosium oxide, used in magnets, lasers and nuclear reactors, has also risen from $700-$740 a kg to $1,470 a kg — up by almost 100 per cent. REE prices have been rising steadily since last year, but the sudden rate rise in the last few weeks is attracting widespread attention.

Analysts attribute the price rise to the China’s policy to bring the country’s mining assets under government control. Trade sources say China, which supplies 95 per cent of 17 key rare earth elements, has clamped on mining and cut export quotas, boosting prices and sparking concerns among overseas users like Japan. Industry sources fear that the government may further reduce export quotas that would result in higher prices.

For the Indian consumer, the price of end products is likely to increase significantly in the coming days. Since, the impact on these segments is yet to be assessed, the quantum of price rise may be evaluated later, said an analyst.

Heavy rare earths are largely mined in the southern Chinese province of Jiangxi where the local government has tightened environmental norms and indicated a crackdown on historically widespread illegal mining. As a consequence, supply of these raw materials is likely to be hampered in the coming months.

In February, China’s land ministry prohibited non-government entities from exploring or mining for rare earths in an area covering 11 mining zones near the southern city of Ganzhou in Jiangxi province. Such restrictions may apply to other mining areas and the ministry may identify parts of these regions as its strategic reserves.

China produced 118,900 tonnes of rare-earths last year, over 30 per cent higher than its planned quota. REE supply outside China, coupled with a forecast of a 48 per cent increase in world REE demand to 185,000 tons in 2015 and shortages of dysprosium and neodymium, have contributed to the rapid price increases.

REE production and consumption have been around for the last few decades, but there are two primary factors that have changed the supply-demand dynamic of the mineral market sector over the last few years.

Demand for REE is increasing in applications that are less esoteric than 20 years ago. And China, which is the world’s main commercially developed REE source of supply, is reducing exports and increasing its consumption of REE, Industrial Minerals Editor Mike O’Driscoll said in an email response.