Bottom Falls Out of Rare Earths MMI® as China’s Fanya Metal Exchange Freezes Deposits

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The monthly Rare Earths MMI® registered a value of 20 in August, a decrease of 16.7% from 24 in July, the latest in a long list of all-time lows.

Rare Earths MMI, August

Of course, falling rare earths prices have been the rule, not the exception since 2011.

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Substitution and weak demand are the biggest culprits but China’s weakening economy has had a particularly profound effect on rare earths which have been used for much more than industrial consumption there.

Chinese Rare Earths Exchange Freezes Deposits

Investors in the financial products sold by the Fanya Metal Exchange demanded their money back in July as the exchange simply stopped disbursing funds last month to depositors. About $6.4 billion in investments is frozen, according to estimates by Chinese media.

Fanya is a forum for trading rare earths and other minor metals such as bismuth that has also functioned as a shadow banking institution — not only leveraging metal deposited with the exchange as collateral for loans, but offering high interest investment products to retail investors.

Its collapse could mean broader, systemic problems for the entire Chinese banking sector.

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The online report of a November 2014 meeting by the Yunnan provincial government on “tidying and reorganization” of local exchanges included a warning by the head of the Yunnan branch of the China Securities Regulatory Commission that “risk at the Fanya Metal Exchange was noted as very large.”

Fanya owes investors the equivalent of $6.4 billion and said in July that it plans to pay them off by buying back some metals on a regular basis.

Overall Weakness

The collapse of the exchange is the latest example of a weakening rare earths market. Earlier, the only US-based rare earths miner, Molycorp, Inc. filed for chapter 11 bankruptcy protection. It is difficult to predict a rare earths price turnaround this year.

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The price of europium oxide closed the month at $160.84 per kilogram after dropping 23.1%. Terbium metal prices fell 16.3% to $619.22 per kilogram. A 14.9% drop over the past month left terbium oxide at $458.38 per kilogram. The price of dysprosium oxide fell 14.0% to $207.48 per kilogram. After falling 12.5%, samarium oxide finished the month at $2,252 per metric ton. Yttrium prices dropped by 11.1% this month to $38.60 per kilogram. A 10.3% decline for praseodymium neodymium oxide left the price at CNY 235,000 ($37,797) per metric ton. At $53,076 per metric ton, praseodymium oxide was down 10.1% for the month. Following a 9.4% decline in price, neodymium oxide finished the month at $38,601 per metric ton. A 6.3% drop over the past month left yttria at $4,825 per metric ton. The price of neodymium closed the month at $53,880 per metric ton after dropping 5.1%.

The price of lanthanum oxide held steady around $2,010 per metric ton last month. Cerium oxide held pat last month at $1,850 per metric ton. Hovering around $4,021 per metric ton for the month, rare earth carbonate remained unchanged.

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.

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