Will Rare Earth Prices Rise Again...? China Freezes Mining and Refining Scale

SCMP "Reducing Production to Induce Price Increase"
Rare Earth Prices Have Fallen 20% This Year

As demand for rare earth elements used in smartphones and essential defense equipment increases, analysis suggests that China is inducing price hikes by freezing the production caps for related mining.

On the 20th, China's Ministry of Industry and Information Technology and Ministry of Natural Resources announced the second production cap for rare earth mining this year at 135,000 tons and the refining cap at 127,000 tons. This is the same as the first cap announced in February.

Combining the two set limits, mining amounts to 270,000 tons and refining to 254,000 tons. This represents a 5.9% and 4.2% increase compared to the same period last year. China announces production caps twice a year, but last year exceptionally had a third announcement. If no further (second) announcements are made this year, the growth rate of the related caps is expected to fall below last year's (21.4%, 20.7%).

A research note released the next day by China Everbright Securities explained, "This decision, coupled with increased demand in the new energy vehicle and wind turbine sectors, will promote a rebound in rare earth prices." On the 22nd, Hong Kong's South China Morning Post (SCMP) diagnosed, "While rare earth prices are falling, China is attempting to influence global supply chain prices by reducing production of the strategic mineral rare earths."

China's rare earth mining, operated under a kind of quota system, is allocated to state-owned enterprises China Rare Earth Group and Northern Rare Earth. Through the second announcement, China Rare Earth Group was allocated 40,930 tons for mining and 45,009 tons for refining, while Northern Rare Earth was allocated 94,070 tons for mining and 81,991 tons for refining.

China's rare earth supply accounts for the largest share in the global supply chain. According to the U.S. Geological Survey, China accounted for 80-90% of global rare earth production in the early 2010s, but as rare earth supply increased worldwide, its share decreased to about 70% in 2023. Earlier this year, the Ministry of State Security designated rare earths as strategic mineral resources directly related to national security and announced restrictions on supply and exports.

Rare earth prices have fallen about 20% since the beginning of this year. The issue of dependence on China for rare earths has risen, prompting governments worldwide to start rare earth production. According to customs data, China's rare earth exports from January to July reached 34,032 tons, a 7.5% increase year-on-year, but the value decreased by 40.8% to 304 million dollars.

This content was produced with the assistance of AI translation services.