Now on! Rare earth clearance sale

Concocting a currency war?

As Japan, the world’s number one importer of rare earths, cuts purchases from China in half and producers outside the country ramp up to production the outlook for prices of the 17 elements looks increasingly bleak.

China Daily reports figures from research house Baichuan Information show prices of lanthanum oxide, praseodymium oxide, praseodymium-neodymium oxide and other rare earths have hit the lowest level this year.

In China, responsible for 90% of the world’s supply, overcapacity seems to be a major cause for declining prices: data from Shanxi Magnetic Material Group, a top producer of NdFeB, the most widely-used rare-earth magnet, show capacity utilization rates in the sector at 40%.

After appearing to bottom out during the second quarter the fall in the value of REEs has continued apace.

Abundant, less valuable REEs have experienced the sharpest reversals.

Lanthanum oxide – used in ceramics and fuel catalysts – for example rose from a price of just $8.71/kg in 2008 to average $117/kg in the third quarter of 2011. During the first three months of 2012 it had pulled back to $42.31/kg. Now it has halved again – this week a kilogram of lanthanum could be picked up for $19. Inside China that same kilogram costs just under $10.

When export prices of lanthanum were at record highs of $117/kg domestic Chinese prices were less than $20. That differential has gone from almost 10 times to double.

This price behaviour can be seen across the board: cerium oxide, used to polish TV screens and lenses, is now also trading at $19 from all-time highs of $118 in the September quarter last year and just under $24.79 during Q1 2012. In 2008 the price for cerium oxide was $4.56.

Praseodymium – used as an alloy in aircraft engines and welder goggles – was available from China in 2009 for $18/kg. After peaking in the second half of 2011 along with all the other rare earths it was still priced at $163/kg during the first quarter of this year. Monday’s benchmark price was $105.

The price of a kilogram of samarium oxide increased dramatically from a mere $3.40/kg in 2009 to average $103/kg in 2011. Used in jet fighter electrical systems among other applications samarium actually increased in value from the first to the second quarter of 2012, from $73/kg to $82/kg. Now it has fallen back to $53/kg free-on-board while the domestic price in China is only $8.70 for samarium.

Heavy, scarcer REEs have generally held up better, but some have experienced price declines of 50%.

Neodymium oxides, used in windmills, have seen a dramatic slump – from $338/kg in Q3 2011 to $100/kg as of 17 September.

A hybrid vehicle ingredient, dysprosium, rocketed from a price of $118.49/kg in 2008 to average $1,449/kg in 2011 and $2,262/kg by September last year. Now the export price is at $920/kg while inside China it is worth only $586/kg.

The reversal in europium oxide – the priciest REE which is used in medical imaging and the nuclear and defence industries – has been most startling.

The price of europium increased almost 10-fold from $492/kg in 2009 to average $4,900/kg in the third quarter of 2011. In the first quarter this year importers still had to pay $3,623. The price is now $2,020 a kilogram. Chinese domestic europium is another $1,000 cheaper at $998/kg.

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