With our monthly Rare Earths MMI® remaining flat at 34 in February, the rare earths market still looks to be depressed. The 2014 supply surplus that we mused about last month looks to have taken hold – at least as far as cerium and lanthanum are concerned.
A bit of news from Lynas Corporation came across our desks, with the company noting in a recent report that lanthanum demand will continue to rise annually by 4% until 2020. Based on that, Lynas is so bullish on lanthanum that they point to several contracts they’ve already signed in which the buyers are willing to pay a higher price for Lynas’ material over Chinese material.
The reason for this? Lynas says that these buyers want a more diversified supply base and are therefore willing to pay more, supporting “sustainable pricing,” as they call it.
Turns out that’s a bit of puffery on the Western producer’s part.
Lynas vs. China
Lynas Corp.’s intent is to “drown out the argument – and purchasing power – that Chinese suppliers have,” said Zachary Schumacher, rare earths analyst for Asian Metal.
“A lot of [US buyers] can smell blood in the water; they know the cerium and lanthanum markets are oversupplied,” Schumacher said. “I struggle to see where these buyers are buying enough volume that there’s even a debate about [sourcing from] Chinese vs. non-Chinese suppliers.” In other words, there’s no reason to pay more for the sake of paying more, especially for comparable-quality material.
The only case Lynas would have, according to Schumacher, is in the realm of extremely high-purity lanthanum, for which the largest lanthanum end-use market in the US – the FCC (fluid catalytic cracking) sector – doesn’t even have a need.
US buyers (big ones such as BASF, and even smaller ones) can easily access the Chinese market and negotiate to buy greater volumes at lower prices; and Chinese suppliers are more than willing to part with their supply. Indeed, US traders such as PIDC and Blue Line buy up tons of material from China in year-end “closeouts” before the next quota, according to Schumacher. So for most buyers, there’s plenty of cheap and easily accessible lanthanum floating around.
Where Lynas/Molycorp Can (Try To) Compete
The Western producers can begin grabbing market share on roughly three fronts, according to Schumacher: muscling in on China’s dominance on the heavy rare earths, differentiating themselves based on high quality/purity, or getting good at the small-volume sales where a buyer wouldn’t mind, for example, a 0.05% increase (if your lanthanum buy is in the millions, it still makes sense to source Chinese material on a total cost basis).
Key Price Drivers of the Rare Earths Index
The price of yttria dropped 7.7 percent. The price of cerium oxide fell 4.0 percent. Rare earth carbonate was down 3.8 percent for the month.
The value of terbium oxide weakened by 2.9 percent this month. Samarium oxide fell a slight 2.6 percent over the past month. Praseodymium oxide closed the month after dropping 1.7 percent. The price of neodymium oxide drifted 1.6 percent lower.
Dysprosium oxide traded sideways last month, as did lanthanum oxide, europium oxide, neodymium and praseodymium neodymium oxide, among others.
The Rare Earths MMI® collects and weights 14 global rare earth metal price points to provide a unique view into rare earth metal price trends over a 30-day period. For more information on the Rare Earths MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.