Prices of rare earth minerals are expected to rebound in the short term as large producers announced to cut production. However, downstream demand remains weak and it will be hard for the prices to continue an uptrend, said analysts.
Large rare earth companies' cut in production Large rare earth producers in China recently announced to cut output in an effort to prop up prices, showing the sluggish rare earth industry.
On Monday, China Northern Rare Earth (Group) High-tech Co., Ltd (600111.SH), China's largest rare earth producer, announced that it would implement the strategy of restricting output and stabilizing prices in a bid to alleviate the imbalance between rare earth supply and demand. The Shanghai-listed company decided to keep its production of smelting and separation products 10 percent lower than the quota assigned by the Ministry of Industry and Information Technology (MIIT) at the beginning of this year.
The ministry unveiled the first batch of total rare earth production quotas for 2015, of which quotas of smelting and separation product amounted to 50,050 metric tons (tonnes), in April this year. Production quota of the Shanghai-listed company's smelting and separation products for 2015 stood at 25,960 tonnes, up 35 percent year on year. Xiamen Tungsten (600549.SH) followed suit and announced on Tuesday that it will cut output of rare earth smelting and separation products this year. The cut will be about 10 percent of the production quota designated by the ministry to the listed company. The company's production quota for rare earth smelting and separation products amounted to 1,379 tonnes this year.
-Soft rare earth prices China officially removed the 17-year quota restrictions on rare earth exports in January and scraped the rare earth export tariff in May, leading to a surge in exports.
In the first three quarters of the year, China exported 23,400 tonnes of rare earths, up 15.8 percent year on year, while the country's rare earth exports during the period fell 6.1 percent year on year to be worth about 275 million US dollars, according to the General Administration of Customs (GAC). Due to a plunge in rare earth prices, the upstream rare earth mining and smelting companies did not yield good performance in the first half of the year.
In the first half of the year, the China Northern Rare Earth (Group) saw its operating revenue increase 35 percent year on year to 3.22 billion yuan, but its net profits edged up only 2 percent year on year to 260 million yuan, lower than expectations.
Association keeps guide price of tungsten unchanged The Ganzhou Rare Earth Industry Association and the China Minmetals Corporation recently released guide prices of tungsten for October bookings.
According to the China Minmetals Corporation, its guide prices for black tungsten concentrate and white tungsten concentrate in October stand at 67,000 yuan/tonne and 66,000 yuan/tonne respectively, the same to that in September.
Meanwhile, Ganzhou Tungsten Industry Association also keeps its guiding prices on black tungsten concentrate and APT in October flat at 67,000 yuan/tonne and 102,000 yuan/tonne respectively. Flat running of the guide prices showed the intention to prevent continuous decline of tungsten prices. However, despite this, tungsten prices were still hard to rebound in October, as the heavy decline in September and sustained depressed market had dealt a blow to market sentiment, said the Shanghai Metals Market (SMM), a commodity information provider in China.
Price likely to rebound in short term Large rare earth companies' cut in production will likely tighten market supplies, to some degree, to prop up rare earth prices in the short term as they take the lion's share in rare earth production quota assigned by the authorities, said analysts.
However, capacity of the domestic rare earth enterprises is much higher than the production quota and the progress of industrial consolidation and de-capacity in the industry is lower than expected.
If authorities did not increase efforts to crack down on illegal production and announce policies to buy rare earths for state reserves, it would be hard for the rare earth prices to reverse the downtrend, said industry watchers.
Whether the prices of rare earths and tungsten can rebound persistently, it still hinges on the downstream demand, they added. (Contributed by Hu Pingchao, hupingchao@xinhua.org)
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