Rare Earth Element Prices Surge as China Tightens Grip

Source: AFP (6/20/11)

"Price surge is 'mainly led by government policies.'"

AFP

Rare earth elements (REEs) prices have skyrocketed this year as China moves to consolidate the sector to tighten its grip over the highly coveted minerals used in high-tech products.

Prices of heavy rare earth elements (HREEs), which are more expensive than the light elements due to their scarcity, have soared by 5x since the start of 2011, China Securities Analyst Zhang Fang said.

Those of light rare earths (LREEs) have meanwhile jumped by 2x–3x during the same period.

Europium oxide, which is used to make TVs and fluorescent lamps, cost ¥26,000–¥28,000/kg. ($4,015-$4,324) Monday, up from ¥7,700–¥8,200 a month ago.

The price surge was "mainly led by government policies that support industry consolidation," Zhang said.

"Both domestic and foreign demand are currently still quite strong," she said.

China has taken a series of measures to tighten control over the industry, citing environmental concerns and domestic demand, which triggered complaints from foreign buyers.

The State Council said last month it wanted to consolidate the REE sector to allow the biggest producers to dominate the industry within two years.

In January, Beijing announced it had brought 11 REE mines in HREE-rich Jiangxi, under state control.

Earlier this month, the Inner Mongolia local government said state-owned Baotou Iron and Steel would take over rival processors in the region, effectively creating a monopoly in the upstream industry in north China.

In an indication of a potential further supply crunch, the Council last month announced for the first time that it planned to build national REE reserve.

Baotou had been building commercial reserves with total capacity of more than 200 Kt., roughly 2x China's annual production.

Beijing has cut REE exports for Q111 by 35% YOY, having slashed the quota by 72% for the Q210.

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