Overall Performance of Rare Earth Industry this year willExperience Significant Shrinkage

Chen Yanhai, Director of the Department of Raw Materials, the Ministry of Industry and Information Technology, said at the Fifth Baotou Rare Earth Industry Forum held on August 8 that there still exists rampant illegal and rulebreaking mining and production of rare earth in China, which seriously affects the development of the entire rare earth industry, in the first half of this year the entire rare earth industry only fulfilled 2 billion yuan profit.

Ma Rongzhang, Secretary-general of the Association of China Rare Earth Industry, suggested establishing a long-term effective mechanism to crack down on rare earth black industrial chain, and establish strategic cooperation partner relation among rare earth upstream, midsteam and downstream enterprises. He disclosed that by the end of this year the Association would finish the compilation of mid to long term development plan for the rare earth industry.

Ma told reporters of the China Securities Journal that, in 2012 the total rare earth ore product mandatory plan for South China is merely 13,400 tonnes; according to statistics analysis of the Association, rare earth mines in South China manufactured at least 37,000 tonnes in 2012. It can be therefore inferred that 70% of ionic ore obtained by South China separation and smelting enterprises is from unspecified sources. He said the rampant rare earth black industrial chain results from difficulty in recognizing illegal enterprises, difficulty in cracking down on illegal mining, interest motivation and serious regional protectionism.

The situation this year allows no optimism. In the first half of this year, the outputs of rare earth ore products and smelting separation products are respectively 41,000 tonnes and 35,000 tonnes, respectively completing 87%and 78% of the plan for the first half of the year, the fulfilled industry profit is about 2 billion yuan. Chen Yanhai said that although the demand in the first half of the year recovered to certain degree, considering the fact that more than half of the rare earth quota has been completed in the first half of the year, it is estimated the overall industry performance this year will experience significant shrinkage.

“At present most enterprises are facing loss,some enterprises are in semi production suspension status, there is a prevalent lack of confidence in the industry. The rising in price of several elements cannot make up for the shrinkage of the entire market; the status quo of the market is characterized by low purchase power,and inadequate transaction volume.” Ma also held the same opinion.

Capacity surplus is also a main reason of unsatisfactory performance in the rare earth industry. According to Gan Yong, President of the Association of China Rare Earth Industry, at present China’s production capacity of rare earth permanent magnet materials is 300,000 tonnes, with an annual production of around 80,000 tonnes, the capacity utilization rate is less than 30%.

“At present excluding catalytic materials, all other rare earth products are in surplus.” said Zhang Zhong, General Manager of Baotou Steel Rare Earth.

Chaotic development of rare earth parks resulted in further surplus in capacity. Ma Rongzhang told reporters of the China Securities Journal that since 2010, many regions had carried out rare earth park planning and construction, there are currently about 18 rare earth industrial parks nationwide. These parks all have similar planning, many are resource- centered, and are extending toward mid to downstream industrial chain.

Ma disclosed that the Association would, on the basis of making comprehensive survey on China’s rare earth resources, production, market, policy, environment, and application aspects, by regarding resource as foundation, enterprise as core, market as orientation, put forward mid to long term development plan for China’s rare earth industry, in order to promote continual healthy development of China’s rare earth industry. It is scheduled that the compilation of this planning will be completed by the end of this year.

Ma indicated that in order to coordinate supply and demand relation, and promote consumption, it is necessary to establish strategic cooperation partner relation among upstream, midstream and downstream enterprises. The Association will strengthen cooperation with relevant industry associations, by taking advantage of the already established hydrogen storage,optical function, polishing, and catalyst branches and the soon-to-be-established permanent magnet and rare earth alloy branches,promote the application of rare earth in automobile, wind power generation, and white household electrical appliance sectors, build rare earth application platform. Guide enterprises to improve R&D, design and manufacture ability, promote the development of rare earth material and applied products.

Speaking of the status quo of the industry, Ma Rongzhang suggested: Introduce rare metal management regulation as soon as possible,clarify the responsible main body, establish long term effective mechanism, standardize rare earth production and operation behavior;organize clean-up and rectification of rare earth waste comprehensive recycling projects as soon as possible, by combining persuasion and pu-nishment, carry out regional planning, set up regional recycling center, standardize the production and operation behaviors of rare earth waste processing enterprises, and incorporate it into the scope of industry supervision; vigorously promote rare earth balanced utilization,in particular surplus elements such as lanthanum and cerium will create surplus of 30,000-50,000 tonnes each year, measures should be taken to encourage the application of lanthanum and cerium in environmental protection field and structural materials; adopt differentiation method for light and heavy rare earth,place the focus on controlling export of heavy rare earth, gradually relax mandatory plan for light rare earth production, and unveil corresponding supporting management measures;progressively cancel export quota for lanthanum and cerium, encourage massive export of surplus elements such as lanthanum and cerium, occupy the international market; adjust resource tax at appropriate time, in order to consolidate the global standing of China’s rare earth industry; draft legal regulations regarding rare earth reserve, and establish rare earth reserve system with classified management.