Rare Earth Prices Double in June and Soar 500% in 2011

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Rare earth prices have risen at a faster pace than expected in 2011, even after a number of upward pressures on the price were anticipated in forecasts made at the end of 2010. In this month, June 2011, the price of dysprosium oxide has doubled from $700-$740 per kilogram at the beginning of the month to the current price of about $1,470 per kilogram. Taken from the beginning of the year, the rare earth's price has seen an exponential rise of more than 470%. It is a key element in the production of lasers, magnets and nuclear reactor components.

Neodymium has risen by more than 340% since January 2011. The europium oxide price has gone up more than 100% since the start of June, and more than 570% since the start of the year. Lanthanum has risen 420% in the same period.

The prices are being pushed upward by increasing demand from global high-tech manufacturers and a global supply bottleneck caused by export controls imposed by China, which currently supplies about 95% of world demand. Chinese manufacturers also are suffering from a shortage of rare earth supplies, and a number of firms in Zhejiang province in the east of the country have shut down production after being hit by rising prices and supply shortages. State-controlled companies have not been spared the pressures. The Chinese government is not approving new projects in the sector and is hitting illegal mining, sales and controlling exports.

The current price/supply scenario is set to continue until at least 2013, when new rare earth production capacity will be commissioned in the U.S. and Australia.

As prices rise, the market picture regarding stockpiling, manipulation and speculation is somewhat murky, but Lianxun Securities (Huizhou City, Guangdong) reports that overall the price surge reflects the value of rare earth elements recovering from a repressed level during the past years. But price increases in the upstream mining and processing industry will send repercussions to downstream firms, and companies with lower valued-added products will be unable to pass on the rising cost and could fold. Lianxun says that current prices are still at the mid and low range of the 1960s when adjusting for inflation and increasing demand.

For more information, see May 25, 2011, article - U.S. Technology, Security to Feel Impact of Rare Earth Supply Squeeze, and April 5, 2011, article - China Announces Upper Limit for Rare Earth Exploitation in 2011.

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