Categories: General Market Commentary
Topics: General Market Commentary

Rare Earth Metals Electrified by China's Illegal Mining Clean-Up

  • Neodymium and praseodymium prices explode this year in China

  • Government is clamping down on illegal mining as demand rises

Rare earths are booming again as a clampdown on wildcat miners in China crimps supply in the world’s biggest producer while the clean energy boom bolsters their use in everything from electric vehicles to wind turbines.

Prices for “light” rare earths including neodymium and praseodymium have exploded in recent months as traders and consumers snap up material that’s becoming scarcer. China’s shutting down illegal producers as the industry is swept up in the same kind of government clampdowns that have shaken other metals markets in 2017. Among many other applications, the elements are needed to make magnets used in motors and turbines.

“The prices of light rare earths still have upside for the longer term,” Alice Mu, a Beijing-based analyst at researcher Argus Metals, said via Wechat message. “There are shortages emerging from the supply side as China’s government shuts down illegal mines, purchases for state reserves, and implements tighter environmental policies.”

China, which produces more than 80 percent of the world’s rare earths, is clamping down on mining as part of a campaign to tackle pollution and tighten control of its massive industrial complex. Measures to curb production have already driven up prices of aluminum and steel and now rare earths are feeling the heat just as demand accelerates.

Praseodymium-neodymium oxide, a raw material for the metal, has almost doubled this year, according to Shanghai Steelhome E-Commerce Ltd. Neodymium surged by nearly a third in August alone and is up 81 percent in 2017. Demand for some rare earths may exceed supply in the second half after the crackdown on illegal mines, Ma Rongzhang, secretary-general of the China Rare Earth Industry Association said, according to a Shanghai Securities News report last week.

Electric Revolution

The rare earths join once-niche metals including lithium and cobalt as beneficiaries of rapid growth in the electric vehicle industry and renewable energy.

Global sales of electric vehicles increased by 55 percent last year to 695,000, primarily driven by China, according to Bloomberg New Energy Finance. While that’s a tiny fraction of the world total, they’ll account for more than half of new sales by 2040 when a third of all cars on the road will be electric-powered, BNEF forecasts.

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