In the first half of the year, the rare earth market remained weak, with both prices and sales volumes declining. However, in a situation where demand was lacking, rare earth prices recently rose against the overall trend, surprising many observers. This week, shares of Baotou Steel Rare Earth and Minmetals Rare Earth hit daily limits, signaling unusual market activity.
“This round of price increases lacks a clear reason,†said Du Shuaibing, an analyst at Baichuan Information, commenting on the recent volatility in the rare earth sector. Industry insiders pointed to multiple factors behind the surge, including crackdowns on illegal mining operations in Ganzhou and the opportunistic behavior of traders taking advantage of supply disruptions.
Among the key players involved, Minmetals Rare Earth's subsidiary, Jixian Hongjin Rare Earth Co., Ltd., had its smelting and separation plant suspended in late June due to alleged use of private mines. When asked about the matter, China Minmetals Group reportedly had no comment.
Since the start of the year, rare earth prices have been sluggish, dropping back to levels seen before the 2011 surge. Despite this, leading companies like Baotou Steel Rare Earth have raised prices against the market, creating further confusion. For example, the price of metal bismuth increased from 310,000 yuan in early June to 365,000 yuan by mid-July, showing a sharp upward trend.
The financial results of major players also reflected the challenging environment. Xiamen Tungsten reported a 77.69% year-on-year drop in net profit for the first half of the year, with rare earth products contributing significantly to losses. Similarly, China National Colors saw a projected 50% to 80% decline in profits for the same period.
While the market is in a downturn, some companies are raising prices in an attempt to stabilize the industry. This has led to increased speculation, as traders capitalize on the uncertainty. According to data from Baichuan Information, prices for various rare earth elements have risen sharply, with cerium oxide increasing by 12% for light rare earths and 30% for medium-heavy rare earths.
Meanwhile, regulatory actions have intensified, particularly in regions like Zhangzhou, where crackdowns on illegal mining have disrupted supply chains. The suspension of Jixian Red Gold Rare Earth, a subsidiary of Minmetals, has further complicated the situation, as it was previously reliant on informal sources of raw materials.
Industry insiders suggest that while central enterprises have sought to control the rare earth market through partnerships with local players, the reliance on private mines has created instability. With production quotas failing to match actual capacity, many separation plants have turned to unofficial sources to maintain operations. However, ongoing regulatory pressure has made this approach increasingly risky.
As a result, some traders have taken advantage of the situation, driving up prices despite weak demand. “Prices have reached a low point, and separation plants are struggling. It’s time to stimulate the market, even if it goes against normal trends,†one company official noted.
However, analysts remain cautious. Du Shuaibing warned that without real demand support, the current price rally may not last long. With Europe entering its summer vacation season, global procurement is expected to slow down further, putting downward pressure on prices once again.
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