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Lynas’s Mount Weld project contains one of the largest and highest grade known deposits of rare earths. The deposit is additionally unusual because it contains very low levels of thorium, a radioactive contaminant commonly found together with rare earth elements. (Image from WikiMedia Commons)
Australia’s Lynas Corp (ASX:LYC) and China Northern Rare Earth are blaming illegal Chinese miners for adding to a global oversupply of rare earths that has driven prices down to historic lows.
In its third quarter report, Lynas — the only standing rare earths producer outside China — said depressed prices for the coveted elements used in the making of in magnets, batteries, catalytic converters and high-tech products, were partly due to mounting competition between legal and illegal miners in the Asian giant.
“We understand that illegal producers currently represent almost half of China’s rare earths production,” Lynas said in the report.
“As a result, all rare earths producers inside and outside China are facing extremely challenging conditions.”
The Aussie producer is not the only one pointing fingers at illicit miners in China. The nation’s largest rare earth miner, China Northern Rare Earth (Group) High-tech Co Ltd (SHA:600111) said this week market conditions have forced them to cut its output target for the year.
The company said it hopes the move helps stabilize the market and improve prices for the elements it mines. Another four local rare earth groups followed suit later in the week, SMM reported.
Government intervention?
According to a source quoted by China Daily, it was the government itself who ask the company to reduce its production target in September, after prices fell more than expected, and many local rare earth miners slipped into the red.
Recent figures disclosed by the Association of China Rare Earth Industry, show that about 90% of the nation’s rare earth producers are currently operating at a loss, and many are expected to close up shop before year-end.
Courtesy of Statista.com
Until 2010, China controlled around 97% of the global rare earth supply. But when it sought to impose export controls to give an advantage to domestic electronics producers, prices soared by up to 20 or 30 times previous levels.
The situation encouraged investment in the sector in the U.S., Australia and other places outside China. But, at the same time, it fired up smuggling from the Asian nation and a consequent drop in prices.
Rare earths were further battered earlier this year, when China scrapped export tariffs, which had inflated international prices, after a World Trade Organization ruling.
The elements have been particularly hard-hit in the ongoing commodities rout. Prices have dropped over tenfold since the 2010 peak, and the total market is now around $1 billion, down from over $17 billion.
Comments
Philip S. Baker
Is illegal REEs mining in China (which the authorities have the power to bring under control) a deliberate ploy to trigger depressed prices and thereby kill off ‘rest-of-world’ production? It bears a striking resemblance to the manner in which Saudi Arabia is aggressively (and somewhat effectively) trying to stymie shale oil development.