Zhao and Saklavala presented in 2019 an ARGUS White Paper and indicated that China’s rare earths market is facing mixed prospects as global economies and industries reel from the impact of the Covid-19 pandemic. Spot supply is rising as Chinese operations emerge from lockdown ahead of many key consuming countries, but downstream magnet demand is expected to remain sluggish in the medium-term, potentially weighing on rare earth prices for the rest of 2020. That said, Chinese producers remain unperturbed and earlier-stage projects outside China are still striving to move forward, anticipating a longer-term revival in demand from the new energy vehicle (NEV) and wind power sectors in particular.
Feedstock supply poised to rise
Domestic supply of rare earth separation and processing products is widely expected to rise, with China potentially increasing its 2020 rare earth production quotas, and ore imports from the US and Myanmar also on the rise. Overall, China’s 2020 rare earth production quotas are expected to increase by around 6pc from 2019 to almost 140,000t this year, based on China’s 13th five-year plan. The rise would be underpinned by light rare earths, in response
to the limited availability of ion-absorption rare earth ores in southern China in the wake of anti-pollution measures and
resource restrictions.
Meanwhile, China’s imports of rare earth ores from the US and Myanmar are expected to remain elevated this year. This follows Beijing’s removal last month of its 25pc tariff on imports of US rare earth metal ores, and also reflects rising operating rates at most rare earth separation plants as China’s lockdown measures ease.
China’s imports of rare earth metal ores from the US rose by 67pc to 23,074t last year, according to customs data. Imports jumped further in the first quarter of 2020, up by 324pc from a year earlier to 11,544t. China’s removal of the 25pc import tariff is expected to ease financial pressure and reduce production costs for most rare earth separation and processing plants. It may also prompt Chinese importers to buy more material from the US.
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