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Review of Rare Earth Market in 2021

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Author : Wayne copy from SMM
Update time : 2022-01-27 11:50:05

SHANGHAI, Jan 17 (SMM) - The rare earth market faced great supply challenges on the back of surging demand thanks to the rapidly development sectors including new energy vehicles (NEVs), wind power generation, etc. in 2020-2021, which are the key application fields of rare earth products, fuelled by the global carbon peaking and carbon neutrality goals as well as the upgrading level of consumption and recognition of energy reservation and emission reduction. The NdFeB magnetic materials manufacturers in the upstream have been actively expanding their capacities to answer the market needs.

Throughout 2021, the annual rare earth mining and smelting quotas rose 20% on the year to 168,000 mt and 162,000 mt respectively, while the upstream supplies of rare earth oxide and alloy were still unable to meet the expanding NdFeB magnetic materials capacity as well as the terminal applications. Taking praseodymium neodymium (PrN) as an example, the domestic demand for rough NdFeB exceeded 200,000 mt in 2021, equalling to a demand of over 80,000 mt of PrNd oxide. However, the total PrNd oxide capacity stood only at 70,000 mt in the same year, leaving a palpable supply gap. Hence, the mainstream rare earth products prices rose as whole in 2021 amid obvious supply shortage.

On the demand side, the restocking demand was high both in China and overseas in October-November due to the Christmas holiday as well as the vibrant downstream sector in China. The market later turned wait and see in December as most manufacturers were about to close their long-term contracts. On the other hand, the market participants faced greater financial pressures around the year-end, and were busy managing their annual income statement. The high raw materials prices also suppressed the downstream demand.

On the supply side, affected by the shortage of thermal coal supply, the electricity restrictions intensified in south China in October, the operating rates of upstream rare earth separation enterprises and metal enterprises decreased, resulting in less supply of mainstream rare earth products such as PrNd, dysprosium and terbium. In addition, the stocks of rare earth ores stored at the beginning of the year were gradually exhausted, and the supply side did not see any replenishments since July when the ore imports from Myanmar were disrupted by the COVID-19 pandemic. The supply gap of domestic rare earth ores expanded further in the fourth quarter.

The rising downstream demand and tightening upstream supply aggravated the gap between the two. The prices of mainstream rare earth products surged on the back of rising costs when the auxiliary materials prices rose on power rationing in south China in Q3.