EV sector demand is already lifting heavy rare earths prices higher
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Major Chinese rare earths producer Southern Rare Earth has raised prices for heavy rare earths (HREE) terbium, dysprosium, gadolinium and holmium “in response to tight spot market availability and firmer demand from the magnet sector”, says Argus.
Companies often divide the 17 rare earths into heavy (HREE) and light (LREE) rare earths based on atomic weight — but these are not formal groupings or applied consistently across the industry, according to Geoscience Australia.
HREE are used in the permanent magnets required for the motors in electric vehicles and wind turbines.
As these sectors boom, so will HREE.
Argus says most Chinese rare earth permanent magnetic material plants have been expanding output since the second half of 2020 “to take advantage of rapid developments in the downstream new energy vehicle and wind turbine industries”.
“China’s magnet shipments started to recover from June last year, driven by higher demand from Asia-Pacific and a rebound in demand from most European countries following the lifting of Covid-19 restrictions,” Argus says.
“Supply shortages and firmer demand from the downstream magnet industry have prompted suppliers to raise offers significantly or withhold material from sales over the past month.
“There is further upside potential in the near term, given the Chinese state reserve bureau will likely launch a second round of national stockpiling purchases for medium and heavy rare earths this week.”
This confirms what the experts are saying: rare earths prices will outperform in 2021.
Barclay Pearce’s Donna Warner says continued trade tensions between China – which controls ~90 per cent of the world’s rare earths — and the rest of the world could see the restriction of rare earth exports as a potential political pawn.
“This scenario would see a spike in prices as buyers seek alternative suppliers such as Australian-based miners Lynas (ASX:LYC) [and mine developers] RareX (ASX:REE), and American Rare Earths (ASX:ARR),” Warner says.
Tim Buckley from the Institute for Energy Economics and Financial Analysis says rare earths – alongside all the other battery metals — will see huge demand growth as the EV industry grows. This will spur a supply response.
“Just think how many Tesla mega factories are going to be added,” he says.
In its AGM on November 26, Lynas chief exec Amanda Lacaze said that demand appears to be returning to pre-COVID levels.
“In particular, the demand from our Japanese customers is strong and demand is strong inside China,” she says.
“Of course, demand varies by segment – we see strong demand for magnetic materials with positive pricing trends.
“[This] market is strong and attractive and we expect that demand for and price of these elements will continue to grow as demand for high power electric motors grows.”