China develops new rare earth military and applications

China has been open about its intentions to develop downstream applications for its rare earth sector.  To this end, China’s achievements in the electric vehicle sector have been well documented. Sales are expected to reach 2% of the passenger vehicle market by the end of the year, with some reports suggesting that EV’s could reach as much as 2.5% of the market. The successful increase in market share is driven by a series of supportive policies, the most significant one being the fact that China has set the goal that new energy vehicles (NEV’s) should account for 8% of the passenger vehicle market by the end of 2018.

The pigments and military sectors are other key focus areas in China. With respect to pigments, the first low-sulphide, environmentally sound pigment project was set up in Inner Mongolia at the end of February. Until now, China has relied on imported rare earth sulphide pigments, but this new product could start to replace China’s lead-based heavy metal pigments and negate or at least limit its reliance on imports.  Developments in China’s military applications have been ongoing which has often sparked policy response from the US. China’s Longyan City revealed that it is commissioning the first productive military-civilian integration project in China, using rare earths as the raw materials into the development of laser crystal production.

In the US, the  big news affecting the extractive sector is President Trump’s infrastructure spending plan which could simplify the environmental permitting process, shortening the average processing time from ten years to less than two years. If passed, the US should start to see increased investment in the resource sector.

Rare Earth projects outside of China are finally gaining traction. Peak Resources released a white paper confirming their intention to produce 9,290 tonnes per annum of rare earth oxide equivalent ( which is roughly half that of Lynas’ production), to become a fully integrated producer  with their own refining capabilities. Meanwhile Northern Mining’ Browns Range pilot plant is set to be commissioned by June this year.

Australian producers continue to increase supply and are poised to become the second largest global rare earth suppliers after China. ThyssenKrupp has just signed its second non-binding agreement with Australian rare earth supplier, Hastings Technology. The agreement is to purchase 5,000 tonnes of rare earths from Yangibana project in Western Australia. ThyssenKrupp has also signed significant offtakes with three other rare earth producers in an effort to limit its reliance on Chinese material.

Looking at prices, prices improved after the Chinese New Year, but there does not seem to be fundamentals to support this increase. It is true that a lot of the excess stocks available before the start of the New Year have been cleared, leading to a tighter spot market, but in general the market appears to have run up on sentiment. Despite this, Core Consultants are forecasting a relatively stable outlook for the next two months as the market finds its middle.

In terms of the international market, European cerium oxide prices have been flat, but all REACH pre-registrations which allows Chinese exporters to export 100 tonnes of cerium oxide per year to Europe is expected to expire May. As the costs of REACH registrations and compliance is somewhat prohibitive, we expect lower cerium volumes in Europe and higher prices from 2H18.

Note: Extracted from Core Consultants’ Rare Earth Monthly Report.

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