Commercial Rese rve will Help Rare Earth Industry to Leave Behind Cold Winter



Commercial Rese rve will Help Rare Earth Industry to Leave Behind Cold Winter

As key component in th e construction of rare earth s trategy reserve system, the rare earth commercial reserve, an initiativ e advocated by the state government, spontaneously carried out by several major rare earth enterprise groups to target at reform of the supply front for the rare earth industry, formally kicked off.

The encouraging news is that, with in a m atter of one m onth, affected by news of rare earth commercial rese rve, ra re ea rth m arket p rices experienced evident rebound. Today, quotation of praseodym ium ne odymium oxide hasreached 265,000 yuan/tonne; quotation of metal praseodymium neodymium is 338,000 yuan/tonne. W hat’s more, dysprosium oxide price has risen from the previous 1,230,000 yuan/tonne to 1,250,000 yuan/tonne; quotation of terbium oxide is 2,350,000 yuan/tonne, rising by nearly 4% since April.

According to m arket analysts, at a tim e when the m arket is slugg ish, the s tate g overnment implements rare earth comm ercial reserve, this sends a pos itive signal to the m arket, and has very big boosting effect for overall earth prices.

The rare earth commercial res erve being unfolded this tim e is a kind of reserve with intake-output function.

From the perspective of functional positioning of rare earth commercial reserve, such practice is rational. Though rare earth commercial reserve is a key component of national rare earth reserv e system, there is the need to guarantee national rare earth security, which needs uniform planning by the governm ent for uniform supervision, yet after all it differs from national strategic rare ea rth reserve, and m ust follow principles of market rules.

As early as in 2012, the State Council distributed the “Opinions of the State Council on Promoting Continual Healthy Developm ent of Rare Earth industry”. This “Opinion” for the first tim e mentioned th e concep t o f “nationa l strategic res erve”, and e xplicitly in dicated to establish rare earth s trategic reserve system, implement two kinds of strategic reserves combining national reserve an d enterp rise (commercial) reserve, physical reserve and resource (land) reserve.

Nevertheless, at present China’s reserve of rare earth s till s tays at en terprise leve l. Owing to steadily dec lining r are earth pr ices since las t year, along with difficult y in obtaining source of state reserve fund, th ese factors prevent the state government from implementing rare earth commercial reserve. T herefore, implem enting rare earth comm ercial reserv e now holds crucial importance for consolidating rare earth national strategic reserve system, and propelling continual h ealthy developm ent of the rare earth industry.

As proven by facts, when dom estic rare earth prices drop to certain s pecific price level, th e state governm ent follows the requirem ents of commercial reserv e mechanism to purchase reserve on the m arket; when rare e arth prices rise to certain specific price level, the state government sells rare earth in acco rdance with the commercial reserve mechanism. When total exploitation volum e of ra re ea rth resourc e is excessively high, resu lting in p lunging rare earth prices, the state government purchases reserve at a ppropriate time, which will play a role of effective market regulation.

Of course, rare earth commercial reserv e is only a breakthrough point, it can speed up the integration progress of rare earth industry. The first project to be carried out should be commercial reserve, which means it is possible to stabilize or lif t rare earth p rice by reducing market supply. Secondly, comm ercial reserve plan should be targeted at several major rare earth ente rprise g roups, in this way it can reinforce competition advantages of enterprises complying with industrial policy, cooperate with relevant environmental protection policies, the pace of marketized merger and restructuring will also be accelerated.

In China, the strategic resource standing of rare earth is impregnable, in particular rare earth prices will begin m id t o long term recovery amid supply cut, industry in-depth integration and inten sified ef forts in the execution of “illegal crackdown” policy. This year m arks the beginning year of the “Thirteenth Fiv e Year” Plan, as subsequent rare earth commercial reserve makes progress, its effects will continue to show up, this year it is hopefu l the rare earth indus try will leave behind the cold winter.