China Consolidates South Rare Earth Group

Core Consultants released its August 2016 Monthly Rare Earth Report. The main topics discussed in this feature include:

• China consolidates South Rare Earth Group
• Development of cerium/aluminium alloy
• China reducing windpower waste

China had a target to establish six rare earth entities by the end of 1H16. At the end of June, the expert panel ratified the formation of China South Rare Earth Group. The Group is a consolidation of 24 entities. The production capacity is 43,600 tpa and the smelting capacity is 59,200 tpa. Like the other five groups, South Rare Earth Group is fully vertically integrated and encompasses exploration, mining, processing, trading and research.

Outside of China, India is looking to develop its rare earth industry in order to support its growing defence sector. In May we reported that the Indian Government was seeking to amend its Atomic Mineral Concession Rules to enable private investors to develop the country’s monazite resources. The proposed amendments have invited criticism from the Beach Minerals Producers Association (BMPA) as they believe that the proposed changes would threaten the existing private producers by forcing those deposits with a monazite threshold higher than 0.75% to be ceded to the state.  The BMPA have argued that this threshold is arbitrary and low and should be raised to a minimum of 5%.

The need for alternative sources of rare earths has been well documented. However, the ability to produce rare earths economically outside of China has been challenging. In particular the deposits are generally rich in light rare earth materials including cerium and lanthanum. Therefore, research has been ongoing into other avenues including reformulations of magnets and other materials.

The US Department of Energy has been developing an aluminium/cerium alloy that could potentially have application in internal combustion engines. If successful, the commercialisation of the alloy may encourage US producers to increase production of rare earths as cerium generally comprises 50% of the deposit’s resource, which in most instances renders these deposits as uneconomic.

Another breakthrough reported this month is a hot deformed neodymium magnet which contains no heavy rare earths. Honda is planning to incorporate these magnets in their hybrid vehicles in August. Initially the magnet will be applied to the SPORT HYBRID i-DCD, a hybrid system Honda will use for the new FREED model.  The thinking behind both the neodymium magnet and the aluminium/cerium alloy is that as companies increase the use of lighter rare earths at the expense of heavier rare earths, deposits outside of China will become better aligned to market demand.

China pledged to supply 20% of its power with non-fossil fuel sources by 2030. However, China is having issues with integrating the wind capacity to its existing electricity grid and therefore around 26% of its energy produced from windpower is being wasted. As such, China will not approve any new projects in those areas where average wind power generation has fallen below par.  The share of wasted energy reaches 50% in Jilin, Gansu and Xinjiang provinces.

Lara Smith

Lara is the CEO and founder of Core Consultants. She has been an analyst for over thirteen years and has focused on commodity markets for just over a decade. She began her career as a buy-side analyst at Foord Asset Management in Cape Town, before taking a Head of Research role at a mining corporate finance and investment firm.

See Full Bio