Rare Earth Prices Likely to Have Bottomed Out, Say Analysts

Rare Earth Prices Likely to Have Bottomed Out
Published on: February 5, 2024

Analysts from various institutions generally believe that the price of rare earth elements has likely bottomed out and is expected to rebound in the second half of 2024. There are two reasons for this prediction: firstly, the resurgence in demand from electric vehicles and wind power, and secondly, the anticipation of a slowing down in the growth of rare earth production quotas in China, a major producer and exporter of rare earth elements.

China plays a crucial role in the rare earth market as a significant holder of rare earth reserves, a major producer, and an exporter. The country’s influence on the global rare earth industry is substantial.

Rare earth elements are a group of 17 metallic elements on the periodic table. They exist in the form of oxides and are divided into light and heavy rare earths. These elements are widely used in important applications in military defense and the synthesis of new materials, such as semiconductors, rechargeable batteries, and high-performance motors.

In 2022, rare earth prices surged to a 10-year high, but experienced a sharp decline last year. The reasons for this decline include increased production in China and slower-than-expected demand growth.

Data from Shanghai Metals Market (SMM) shows that the price of praseodymium oxide dropped by 34% in 2023, while the prices of terbium oxide and neodymium oxide also plummeted to their lowest levels since the end of 2020. Analyst Yang Jiawen from SMM indicated that with the significant price decline, there is limited room for further reduction in rare earth prices. The price of neodymium praseodymium oxide, used for manufacturing permanent magnet materials, plummeted by 38% last year and is approaching the cost line.

In 2023, China issued rare earth quotas in three batches, a departure from the usual practice of issuing two batches per year, signaling the country’s positive attitude towards the development of the rare earth market and its support for the continuous expansion of demand. Last year, China’s total quotas for rare earth mining, smelting, and separation reached 255,000 tons and 243,850 tons, representing year-on-year increases of 21.4% and 20.7% respectively.

However, analysts at Baiinfo stated that China’s rare earth quota growth rate for this year is expected to slow to between 10% and 15%. Ross Embleton, an analyst at Wood Mackenzie, also indicated that they expect the total quotas for rare earth mining, smelting, and separation to increase again, but the growth rate will be lower than last year’s.

On a global scale, the majority of rare earth mineral resources are mainly distributed in China. Data from the United States Geological Survey (USGS) shows that in 2022, the global rare earth reserves amounted to 130 million tons, an 8.3% increase year-on-year. Among them, China’s rare earth reserves reached 44 million tons, remaining steady year-on-year, accounting for a high proportion of 34% of the global total and ranking first in reserves.

In terms of production, nearly 70% of global rare earth ore production is in China. In 2022, the global rare earth production was 300,000 tons, a 3.4% increase year-on-year. China’s rare earth production reached 210,000 tons, a 25% increase year-on-year. Additionally, China’s refined rare earth production accounts for 90% of the global total. Since 2006, China has controlled the supply of this strategic resource through a quota system.

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