Iron ore weakness to continue into 2025 and beyond, says Fitch Solutions’ BMI
Looking beyond 2024-2025, BMI analysts maintained their view that iron ore prices will likely follow a multi-year downtrend.
In order to crack down on illegal mining, pollution and modernize the country’s mostly low-tech industry China consolidated its rare earth industry under six large organizations in 2014.
By far China, and the world’s leading rare earth producer is China Northern Rare Earth Group High-Tech Co which owns the giant Bayan Obo mine in Baotou, Inner Mongolia. The complex produces more than the rest of world’s rare earths mines combined and for most of its many decades-long life has been doing so as a byproduct of iron ore mining.
After consolidating five rare earth separation and refining businesses little over a year ago CNRE has a combined rare earth processing capacity of 73,500 tonnes per year. That compares to 2015 total global mine production of roughly 124,000 tonnes in 2015 according to USGS.
CNRE’s A-shares (SHA:600111) are worth $7.6 billion on the Shanghai Stock Exchange, making CNRE the closest thing to a rare earth bellwether as you can find. CNRE’s stock rallied as much as 7.1% on Tuesday amid an otherwise flat Chinese equity market. The stock is up more than 20% since its end-February lows.
Forcing plant closures and stockpiling would be just the latest attempt by Beijing to tighten its grip on the industry
“Speculation the authorities will take steps to cut capacity as well as boost buying for state reserves is lifting rare-earth producers,” Shen Zhengyang, strategist at Northeast Securities Co. in Shanghai told Bloomberg on Tuesday.
Forcing plant closures and stockpiling by the The State Reserve Bureau (just as it does with copper whenever it feels prices are low enough to warrant purchases) would be just the latest attempt by Beijing to tighten its grip on the industry since it was forced to scrap export quotas and lifted export tariffs.
The country is also redoubling efforts to stop illegal mining and exports which according to some estimates top 40,000 tonnes and has stayed stubbornly (some might say inexplicably) high.
Exports from the country which produces more than 85% of the world’s supply have soared this year with the data showing rare earth oxide shipments more than doubling for the first quarter of the year at 11,956 tonnes. March was the second best month on record.
Exports were expected to drop off dramatically in 2016 after December when cargoes hit a record high of nearly 5,000 tonnes as users built up inventories ahead of the Chinese new year.
Exports of dysprosium (a hybrid-vehicle ingredient which is also used in making laser materials) surged five-fold while neodymium (used for permanent magnets in everything from smart phones to anti-lock brakes) shipments jumped more than 300%.
Rare earth oxide shipments more than doubled in the first quarter of the year
A pick-up in global demand is encouraging, but China’s own downstream industry consumes the bulk of mined REEs and the forecast is for strong growth in domestic demand as well. China’s Rare Earth Industry Association predicts demand will grow steadily in the next few years and is estimated to reach nearly 150,000 tonnes in 2020.
The price index for the 17 elements compiled by the industry body has also recovered somewhat from six-year lows hit in September. At 115.8 on Tuesday, it’s up 7% since then.
Cerium – used mainly to polish and colour glass – is the cheapest REE, but a solid cerium price means other more valuable, but less abundant rare earths can also be mined profitably by improving the economics of projects as whole.
Cerium together with neodymium (also CNRE’s main products) account for more than 50% of total REE demand. From around $1.70 per kilogram at the start of the year, cerium oxide prices (fob China) have recently climbed back above $2.00.
No fireworks then, but after five years of declines, the battered sector needs all the good news it can get.
