Rising REE Prices Hit Downstream Industries

Source: Business China (6/9/11)

"In China, the price of dysprosium is now changing every two days."

Business China

Japanese chemical giant Shin-Etsu Chemical decided to raise the price of its rare earth element (REE) magnets, which not only will prompt other such enterprises to follow suit but also will have a fairly large impact on downstream industries. The company said it would increase by over 40%.

Neodymium and Dysprosium in China

The price of neodymium has skyrocketed from ¥100K/ton to ¥1.4M/ton since 2008, when China issued a series tightening measures for the country's REE industry. An industry insider who works for a Chinese rare earth-export enterprise said the price of dysprosium in China is currently changing every two days—from one to two weeks previously. That will reduce export volumes, as enterprises' profits won't be able to cover the uncertainty cost caused by the time lag.

Mining Restrictions and Export Quotas

China is the world's largest REE producer and exporter, accounting for >90% of global production. It's also home to one-third of global total reserves. Japan is one of the world's largest REE importers.

Chen Zhanheng, director of the Chinese Society of Rare Earths, told the Business Herald that rising rare earth prices could force some industries to transfer from Japan to places with an abundance of rare earth resources.

The Japanese government has reacted quickly to prevent that, issuing a series of acts to prevent auto and electronics goods makers, which are highly dependent on REEs, from relocating outside the country.

On June 3, Japan announced emergency measures to avoid being held hostage by Chinese price fixing and quotas for rare earth metals crucial to industrial production.

Japan's government will use $8.7 billion yen of the money earmarked for policy measures related to rare earths included in the supplementary budget for fiscal 2010.

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