China decides the West's rare earths options25 Mar 2024 16:50
TheGreekLizard - Goldman Sachs may be optimistic, but tightening markets and lower interest rates won't be the key drivers for rare earth magnet metals and materials future pricing.
This is well worth a read (Feb 21 2024):
https://theoregongroup.com/investment-insights/the-wests-pursuit-of-rare-earths-hits-resistance-from-china/
China only needs to paralyze Western investment in building independent rare eath supply chains for about another 3 or 4 years, and then it will have achieved complete domination and control of the market. This will be the main determinant of where Nd Pr materials prices are going in 2024 to 2030, not global demand or borrowing costs.
Some key points from the above link:
"Rare earth prices surged in 2022, but then fell to some of their lowest levels for years after China ramped up production to 210,000 tonnes in 2022. Then in 2023, China issued — for the first time since it introduced a quota system in the 1990s — three quotas in one year, with the total a record high of 255,000 tons, a 21.4% year-on-year increase.
This oversupply has flooded the market and put significant downward pressure on prices, especially as demand contracts with high interest rates hitting the energy transition".
Net profit at China Northern Rare Earth Group (one of the largest Rare Earth companies in China) is estimated to have fallen 60% from 2022-2023.
“If you’ve got 90% market share of magnet processing capacity, there’s a goldilocks price where you earn a return but you don’t encourage anyone in the rest of the world to build capacity”
Chinese companies are also moving to dominate the international industry, for example, Shenghe Resources, the largest importer of rare earths in China, has moved aggressively in just the last few years to influence the international market:
- acquired stakes in two Australian companies that own rare earth mines in Greenland and Tanzania, with exclusive rights to the minerals
- acquired a 7.7% stake in MP Materials, the largest mine and processing plant in the US
- acquired a 9.9% stake in Australia’s Vital Metals
- acquired Canada’s rare earths stockpile
The Oregon Group Report ends by asking the question:
Is the West prepared to finance long-term, higher-priced investments to bypass cheap and efficient Chinese supply chains that are working to suppress prices and technological advancement, buy up stock and potentially introduce export restrictions to tighten supply?
That is indeed the question....
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