China’s rare earth exports rise despite falling prices

In the past few years, a veritable gold rush has begun around the world to support the supply chains of “rare earth elements” essential to the manufacturing processes of clean energy and other technological components, from electric vehicle batteries and solar panels to to smartphones. While the 17 elements in the periodic table known as “rare earths” are the subject of much anxious market trading and speculation, “rare” is a bit of a misnomer. Most of these elements are actually quite abundant in nature, although the mining and processing infrastructure surrounding their use has, in some cases, remained in following demand as new sectors of clean energy production come to market.

China in particular was busy getting loose rare earth reserves and contracts in emerging markets for years and now has a firm grip on global supply chains. Beijing alone is responsible for 70% of the world’s rare earth ore mining and 90% of rare earth ore processing, according to a June 2023 report by the Oxford Institute for Energy Studies. Furthermore, China remains the only large-scale producer of heavy rare earths on the planet, not because China itself hosts rich deposits of them, but rather because of “decades of state investment, export controls, cheap labor and low environmental standards,” Oxford states in the report on China’s Rare Earth Dominance and Policy Responses.

China may have taken it ahead, however, as rare earth prices have suffered a significant and prolonged decline in 2024 due to lower demand and what is turning into a significant oversupply problem. “Exports of rare earths from China, the dominant producer, rose 7.5% year-on-year in the first seven months of 2024,” The Japan Times reported this week, “but prices have continued to decline over that period and are nearing three-year lows.” This year, dysprosium oxide and terbium oxide prices have fallen 32% and 26% respectively, while neodymium oxide and praseodymium oxide prices have both fallen around 15%.

Rare earth prices rose briefly in July on speculation that China would make some significant purchases to stockpile these critical elements, but such bulk buying never materialized and prices quickly retreated to new lows. three years. As a result, rare earth producers are now sitting on their own supply stocks in the hope that prices will recover in the short to medium term, according to analysis from Rystad Energy.

The issue of oversupply of Chinese products and materials is a broader trend that has caused no shortage of market disruption and hand-wringing in the West. “With a weakening economy, China is naturally looking for exports,” Brad Setser, a scholar at the Council on Foreign Relations, told the Wall Street Journal. at the end of last year. “But any significant expansion of Chinese exports beyond current levels will crush production elsewhere.” China is already under investigation for unfair trade practices related to market flooding and predatory pricing in a number of countries whose markets have been flooded by reduced Chinese exports.

Indeed, China’s continued exports during the market downturn appear to be a large part of the current deflation in rare earth element prices. In the first seven months of this year, while rare earth prices have been steadily declining, China’s exports are still up 7.5 percent year-on-year.

Market analysts believe that demand for rare earths – and thus rare earth prices – will eventually recover, but it will not be an immediate correction. There is no short-term catalyst to solve the oversupply problem, but demand is likely to grow slowly and steadily in line with long-term demand growth in key energy transition sectors such as electric vehicles, thin-film solar cells thin and wind turbines. .

By Haley Zaremba for Oilprice.com

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