In the first half of the year, the rare earth market experienced a downturn, with both prices and sales volumes declining. Despite weak demand, recent rare earth prices have risen unexpectedly, bucking the trend. Baotou Steel Rare Earth and Minmetals Rare Earth stocks saw significant gains last week, raising questions about the underlying reasons for this price surge.
“This round of rare earth price increases lacks a clear justification,†said Du Shuaibing, an analyst at Baichuan Information, in an interview with reporters. Industry insiders suggest that the recent price rise may be linked to crackdowns on illegal mining operations and speculative trading activities in Ganzhou, where rare earth traders are taking advantage of supply disruptions.
Minmetals Rare Earth (Chuzhou) Co., Ltd., a subsidiary of Jixian Hongjin Rare Earth, has been implicated in using private mines, which led to a suspension of its smelting and separation plant since late June. When asked about these issues, China Minmetals Group stated it was unaware of the situation.
The rare earth sector has seen a sharp decline in prices over the past year, with values dropping back to levels seen before the 2011 surge. However, major players like Baotou Steel Rare Earth have recently raised prices against the market trend. This move comes as companies attempt to stabilize the market during a traditionally slow sales season.
Xiamen Tungsten and China National Colors Co., Ltd. reported poor performance in the first half of the year, with rare earth products contributing significantly to their losses. Xiamen Tungsten's net profit fell by 77.69% year-on-year, while China National Colors expected a drop of between 50% and 80%.
Prices of various rare earth elements have increased in recent weeks. For example, cerium oxide prices rose by 12% for light rare earths and 30% for medium-heavy rare earths. As of July 12, bismuth oxide was priced at 285,000–295,000 yuan per ton, up 5,000 yuan from the previous day. Metal bismuth reached 380,000–385,000 yuan per ton, with a 15,000 yuan increase from the prior day.
A key factor behind the price increase is the ongoing crackdown on illegal mining in Zhangzhou, which has disrupted supply chains. The Jixian Red Gold Rare Earth Company, a subsidiary of Minmetals, was temporarily suspended due to its use of private mines. This has created a gap in supply, prompting some separation plants to turn to unofficial sources.
However, with stricter regulations in place, many enterprises are struggling to meet production demands. According to industry sources, the production quotas allocated to separation plants are far below their actual capacity, leading to inefficiencies and reduced output.
Traders have capitalized on this situation, driving up prices in the absence of stable supply. “The rare earth market is in a low point, and companies need to stimulate demand,†one executive noted. “Although this practice goes against market order, it’s necessary to keep the market moving.â€
Despite the current upward trend, analysts remain cautious. Du Shuaibing warned that the price rally may not last long, especially as European demand slows during the summer months. Without strong demand, prices are likely to face downward pressure again in the coming months.
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