Abstract
China boasts the largest rare-earth reserves among all countries in the world.
In the past, China sold primary products like rare earth chloride,
carbonate-rich rare earths to foreign companies, which would then separate and
refine these primary materials to produce rare-earth metals. As China' s
rare-earth smelting techniques develop and upgrade, not only the quality of
its products has been improved, but its production capacity has also expanded.
Instead of selling primary products, China has begun to sell single rare-earth
oxides and fluorides to foreign companies. In recent years, China' s rare-earth
industry has developed an enormous competitive edge due to two important
factors: firstly, China' s rare-earth industry has been growing by leaps and
bounds, its output of rare-earth metals has multiplied, and both the
industry' s technological level and product quality have reached or even
surpassed those of other countries; secondly, the production cost in China is
very low, to the point that even the sales price of China' s rare-earth
products is lower than the production cost of foreign enterprises. As a
result, most rare-earth producing enterprises in countries like the United
States, Japan, France, Britain, Germany, Austria, India, and Russia find it
very difficult to make any more profits. They began to reduce or even stop
their production activities and adopted a new strategy of buying rare-earth
metals and alloys from China. At present, China' s share in the world
rare-earth metal and alloy product market is over 80 percent.
In an attempt to regulate and improve its rare-earth metal ore mining
industry, which is an upstream industry to many other industries, China has
resorted to policies of mining quotas and export quotas in recent years to put
a control over the indiscriminate mining practices in the industry and reduce
malicious price competition. A positive result of these policies is the
steadily rising rare-earth metal price. In 2007, 96.77 percent of world
rare-earth export came from China. The country has an absolute dominance in
the world' s rare-earth supply, and this position will remain so for a
considerably long time to come. Due to China' s rare-earth export quotas
instituted in recent years, its export of rare-earth products in 2008 will
decrease by about 5 percent over 2007. This, together with the fact that the
world' s consumption of rare-earth metals continues to grow, is expected to
further aggravate other country' s dependence on China for rare-earth products.
In addition, China is also the biggest rare-earth consumer in the world. Its
share of rare-earth consumption in the world total has been steadily
increasing and now the share is about 50 percent.
One of the biggest downstream industries for the industry is the electronic
component and part manufacturing industry. Riding on the wave of the
tremendous growth of China' s electronic industry, the country' s electronic
component and part manufacturing industry is also booming. China has now
become the world' s manufacturing base for loudspeakers, electrolytic
capacitors, kinescopes, printed circuit board, discrete semiconductor devices.
In the first two months of 2008, China' s electronic component manufacturing
industry realized a gross industrial output value of 119.699181 billion RMB,
an increase of 29.68 percent over the same period in 2007; and the industry' s
total sales revenue in the same period was 115.11561 billion RMB, which was a
28.13 percent increase over the same period in 2007. The country' s electronic
device manufacturing industry also experienced tremendous growth in the first
two months in 2008, achieving a gross industrial output value of 84.956401
billion RMB and total sales revenue of 79.937222 billion RMB, an increase of,
respectively, 30.12 percent and 29.63 percent over the same period in 2007.
As the sales of electronic products (like laptop computers) and automobiles
continues to grow, worldwide demand for rare-earth metals will increase and
the world' s dependence on China for rare-earth supply will also increase.
These two factors will combine to push up the price of rare-earth metals.
In the international market, the prospect for the application of rare-earth
permanent magnetic materials is bright. Particularly, as a result of the
development of the knowledge economy represented by the information industry,
rare-earth permanent magnetic materials will be put to more new uses. Apart
from extensive application in computers, printers, mobile phones, household
electrical appliances, and medical equipments, they are also beginning to be
used in automobile engines, motors and audio systems. This will prove to be a
boost to the world' s NdFeB industry, which is predicted to turn out 102,700
tons of NdFeB magnets in 2010.
The impact of China' s tightening export control policies can be clearly seen
in Japan' s rare-earth import price. In 2007, because of the 40-60 percent
increase in the prices of cerium oxide and yttrium oxide in the world market,
the average price of Japan' s rare-earth import increased by 68 percent and
reached 1,724 yen per kilogram (CIF Japan). And the average price of Japan' s
rare-earth import from China rose by 69 percent and reached 1,768 yen per
kilogram. This price meant a 240 percent increase over the 2003 price, which
was 518 yen per kilogram. Moreover, as this is a general concern in Japan over
the possibility of rare-earth metal supply shortage due to China' s continuous
economic growth, Japan has planned to increase its rare-earth metal stock
which is intended for high-tech uses. As early as in 1983, Japan had launched
an emergency stock plan for manganese and other six rare metals that were used
in steel products. It has been reported that Japan is now planning to increase
its stock of rare metals including platinum, indium and rare-earth elements.
At present, China' s output of praseodymium and neodymium alloys has begun to
contract. The country' s domestic rare-earth market is now in a volatile state.
Starting from the beginning of August, 2008, China' s domestic price for
praseodymium and neodymium alloys has dropped by a surprising 22 percent to
140,000 RMB per ton. The market is still volatile. And most of China' s
large-scale rare-earth smelting enterprises have cut their production. As the
rare-earth smelting plants in Sichuan Province restored production one after
another in September, the short-term price for praseodymium and neodymium
alloys is likely to go down below 140,000 RMB per ton. Currently, these are
still many uncertainties for the price trend of praseodymium and neodymium
alloys. Some analysts predict continuing price reductions while others see a
turning point in the near future. At present, most smelting enterprises in
northern China are maintaining their price of 140,000 RMB per ton and above
for praseodymium and neodymium alloys; in comparison, some southern
enterprises have reduced their price to about 138,000 RMB per ton, though the
sum of transactions is low.
The 2006 and 2007 world demand for rare-earth metals were 108,000 tons and
116,000 tons respectively. It is predicted that world demand for rare-earth
metals in 2012 will increase by between 8 and 11 percent.
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