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The last round of stockpiling ended in a stalemate. The SRB were unable to procure material at their target price owing to artificially inflated offer prices. The expectations are that the SRB will try again to purchase the remaining material in July. We understand that there are roughly 1,270 tonnes that remains to be bought in order for the state reserve to fulfil its target of 3,870 tonnes.  Prices have now begun to normalise and, given that the SRB has now established a reputation that it refuses to overpay for stock, prices are unlikely to increase during the next round of purchases.

Outside of China, Ucore has been working on a pilot plant to separate rare earths using Molecular Recognition Technology (MRT). During the month, the pilot test successfully separated a rare earth mixture into heavy and light material with over a 99.99% purity. The next phase will determine whether the technology is able to separate the heavy rare earths into its individual constituents. If successful, this would represent a breakthrough in rare earth smelting. The potential for this technology could be to offer a cost-effective alternative to separating these materials in China.

India is looking to develop its rare earth industry in order to support its growing defence sector. Last month 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 areas for development have now been reserved. The Indian defence budget is set to increase by 8% y.o.y and the Modi plan is to develop India as a manufacturing hub for missile guidance systems and other optical instruments. As such the development of its rare earth reserves, along with its thorium and uranium deposits is regarded as an integral part of the country’s plan.

With respect to the end user market, the International Energy Agency (IEA) released its report revealing that electric cars now stand at 1m vehicles and is expected to reach 1.26m by the end of the year. While the penetration rates of electric vehicles are still relatively small, incentives are expected to expand, which should see upward pressure on demand.

Last month we discussed that the EU was focused on recycling permanent magnets from hard discs. This trend towards supporting recycling projects is expected to continue as the European Commission has stressed the importance of developing their ‘closed loop’ business models.

Looking at prices, we expect that prices across the board ( heavy, light, FOB, domestic) will remain more or less stable, with a slight downward bias (-1%) between now and the end of the summer period. In so far as the export market is concerned, we do not expect much in the way of buying activity until the end of the summer period in late August/September.

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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.
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