Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
The impact of the coronavirus has been felt on a range of markets as well as the macroeconomic performance of the Chinese economy during early 2020. The rare earths industry has not been exempted from these factors, as many Chinese processing facilities have reported prolonged closures after the Chinese New Year holiday and there have been disruptions to both local and national transport networks, labour availability and enforced shutdowns at facilities, a new market report by Roskill found.
“While temporary closures are not uncommon around Chinese New Year celebrations, the widespread prolonged nature of the closure, compounded by disruption to distribution networks, has caused concerns over the supply of Chinese rare earths both domestically and internationally,” Roskill’s David Merriman wrote.
At the beginning of February 2020, 70–80% of capacity at rare earth processing facilities is estimated to have been suspended
At the beginning of February 2020, 70–80% of capacity at rare earth processing facilities is estimated to have been suspended for a period, representing roughly 80-100ktpy REO of reported processing capacity for predominantly heavy rare earth products, the report found.
“Though this may at first appear worrying, considering global refined production totalled 173kt REO in 2019, in reality a significant portion of this capacity is redundant, representing outdated or unlicensed facilities, Merri Rare earth separation facilities in southern China have consistently reported capacity utilisation of below 40%, with many remaining mothballed since environmental controls were tightened in 2017-2018,” Merriman wrote.
Disruption to Chinese transport networks, may impact the distribution of rare earth products to domestic and international customers, and many processing facilities had prepared inventory to meet orders ahead of planned closures in late January, the report read.
“As a result, there has been minimal impact on suppliers’ ability to meet demand, indicated by only limited price reactions for rare earth products, with Dy oxide prices increasing only 2.6% between the start of January and mid-February 2020. The restart of production at those rare earth processing facilities with effective capacity is now being reported in southern provinces, most notably in Guangdong and Jiangxi provinces, with capacity expected to meet demand and minor restocking at end-users,” Merriman wrote.
(Read the full report here)
