China Monthly RE Exports; China EV Sales Double YOY; Window of Opportunity for Jr RE Miners Opens Wide;

Rare Earth 2020 November 12

China’s monthly rare earth exports

Here the table of China rare earth monthly exports in metric tons:

and for good measure, the corresponding graph:



So you really think the West depends on China’s rare earths?

We have a slightly more diverse view.

Look at this global market share of NdFeB permanent magnets, made from ~25% neodymium, ~5% praseodymium, ~1% dysprosium, ~1% terbium and the rest is iron (magnetite):

Source: 2020 China Rare Earth NdFeB Material Market Research Report-Industry Status and Future Business Opportunities Forecast Blue is China, red is Japan, green is others.

With Japan’s Hitachi Metals for sale, quite possibly to a dominant magnet company in China who happens to have a joint venture with a US-owned magnet maker in Germany, China’s world market share in NdFeB magnets may rise above 90%.

China’s 2019 output was 180,000 t of NdFeB magnets. Here the growth history for China’s output of NdFeB magnets (in ten thousands of metric tons):

Source: 2020 China Rare Earth NdFeB Material Market Research Report-Industry Status and Future Business Opportunities Forecast

Yes, it doubled from 2012 to 2019.

And now here the growth forecast for NdFeB magnet production in China until 2025 (in ten thousands of metric tons):

Source: 2020 China Rare Earth NdFeB Material Market Research Report-Industry Status and Future Business Opportunities Forecast

2025 is an increase of more than 35% over 2020.

Only about 20% of that is export to more than a hundred countries. Largest export destinations are Germany (18% of exports), Japan and USA (each 12% of exports). A large part of the exports to Germany is probably production of a German-Chinese joint venture in Beijing.

Now one could conclude, that the West not only depends on China’s rare earths, but also on China’s permanent magnets.

We think the West is about to move past that point: The western import dependence is on components and products manufactured from rare earths and permanent magnets, moving a step higher on the value chain that current concepts suggest.

One of the current battles is on for the dominance in traction motors for electric vehicles, containing NdFeB magnets (we reported).

Are junior rare earth miners beating a dead horse?

One thing for sure, for consumption in the West we currently need an additional large rare earth mine as urgently as we need a third shoulder.

What? Why?!

In the first half 2020 China exported 142 t neodymium oxide, valued at US$ 6.7 mio, 24 t less than in the second half 2019.

Further 77.7 t of praseodymium oxide, valued at US$ 3.45 mio, 42 t more than in the second half of 2019.

Yes, we know that the bulk of China exports and the bulk of western demand are dirt-cheap lanthanum and cerium, but the noisy hype is about neodymium and praseodymium.

There is no point opening or even planning to open an operation that churns out thousands of tons of NdPr with almost nowhere but China to go to.

Only if demand in the West should increase more than 10 times, there may ba a point.

There are forecasts to that effect, however, many previous spectacular forecasts in the rare earth scene flopped, seriously undermining general credibility of rare earth consumption forecasts.

These forecasts are not made by fools, but most forecasts simply underestimate China dynamics. Read on.

China steamrolls the market for permanent magnets

See again the Chinese NdFeB magnet production output graphic from China for the year 2019:

Source: 2020 China Rare Earth NdFeB Material Market Research Report-Industry Status and Future Business Opportunities Forecast

And now understand, that according to this article the China province of Zhejiang alone has a NdFeB capacity (capacity ≠ actual production) of 115,600 tons, representing 38.7% of China’s total NdFeB capacity:

This suggests, China’s total NdFeB capacity already now is close to 300,000 tons. The China forecast is an actual production output of 260,000 tons by 2025.

Forecasts for 2025 world NdFeB magnet demand of the usual western suspects are much lower than that.

Overcapacity and overproduction, which usually has an adverse impact on prices, particularly, if there is competition for market share.

Little wonder that Hitachi Metals want to rid themselves of their magnet business, in view of the expiry of their core patents and this China magnet tsunami.

Assume you are a western NdFeB magnet producer, you will have to pay the China price for the rare earth input, no matter if the supplier is in China or elsewhere. The trouble is, that China price includes China VAT and China does not refund its 13% VAT upon export of rare earth products, while domestic VAT is cost-neutral in-out.

So as a non-China NdFeB magnet producer already your raw material cost are already 13% higher than any China domestic NdFeB magnet maker.

To add injury to insult, Chinese NdFeB magnets get a full VAT refund upon export.

This means almost certain death for non-China based permanent magnet production when competing with China, but it is great news for those who buy permanent magnets.

So you don’t want to be a large scale rare earth oxide producer in the West, you also don’t want to be a permanent magnet maker. So, how?

Here is the good news: China needs the raw material

China has a history of overproducing anything and everything, ruining everyone including its own in the process. This is one of the questionable merits of state planning & policy in Socialism with Chinese Characteristics, including Mao Zedong Thought, Deng Xiao Ping Theory, the Three Represents, Scientific Development, Xi Jin Ping Thought and the Great Rejuvenation of the Chinese Nation in the New Era.

Also the NdFeB magnet production increase is a bet on the future, and, as described above, we may see a cut-throat competition war for market share among Chinese NdFeB magnet manufacturers.

Meanwhile, on the rare earth part of the story, based on actual domestic raw material output, which diverges from the plan (!), the China rare earth enterprises can’t get enough raw material to even produce the government-set quota , and that creates a sizeable demand for import of monazite, bastnaesite, xenotime, rare earth carbonate and concentrate.

At this time we conservatively estimate China import need to be at least 70,000 metric tons of these raw materials (much of the imports is misrepresented upon import, particularly monazite, so don’t you ever expect correct official numbers).

However, the record bastnaesite exports of China-controlled MP Materials to China are well documented.

This gets better and better for junior RE miners

We reported already a solid increase in rare earth oxide prices and it has become evident, that increased import raw material prices probably play a role in this, paired with the desire of NdFeB magnet makers to lock in the current price level of rare earth oxides.

The trend that one could observe over the past ten years (starting from pre-rare earth shock), is unequivocal in terms of the market for magnetic materials:

Heed the plan

However, we’d like to caution a bit. We repeatedly reminded everyone of the current 5-year plan, 2016-2020.

Different from before 2013, this is the age of compliance in China, the 5-year plan is is edged in stone, it is sacred and fulfilling it is a must.

One stipulation of the plan was, to keep the production quote below 140,000 t TREO equivalent per year.

Another one was, to reduce processing/smelting capacity for rare earth from 300,000 t to 200,000 t per year (actually, capacity in 2015 was still 400,000 t, according to our findings. The improvements of margins are clearly visible in the RE metal prices, which suggests capacity reduction happened and worked as designed).

COVID-19 helps them to almost fullfil the planned reduction of rare earth exports to 30,000 t by 2020.

The same plan banned domestic monazite mining.

The relentless environmental protection campaign led also to very slow approval for opening on new deposits in China, and only very recently the Ministry of Land Resources handed out licenses for some minor deposits, under strict compliance terms, so not much new domestic mining for RE raw materials has come up recently.

So, rare earth raw materials are all the rage in China.

The 5-year plan dominates it all

It will be interesting to see, if the new 5-year plan 2021-2025 for rare earth will address the festering shortage of raw material, as mine output was not part of the current plan, which created the evolving situation. Question is, China will make the new plan public, or if it will be declared a secret under the National Security Law this time.

If the new plan does not offer relief for the supply-demand gap in rare earth raw materials, and that will be a large window of opportunity for junior rare earth miners.


Sorry for the longish post, we tried but there is no way of making it shorter. Thanks for reading.

Have a great weekend ahead!

//Companies

China aluminium giant Chinalco names former SPIC exec as president

Aluminum Corp of China, or Chinalco, said on Monday that its former vice president Liu Xiangmin has returned to the company to take over as president, replacing Yu Dehui.

The combined output of Chinalco’s main listed aluminium arm, Chalco , and another subsidiary, Yunnan Aluminium, was around 5.7 million tonnes last year, exceeding that of China Hongqiao Group.

Chinalco group companies also produce other nonferrous metals such as copper and zinc, as well as rare earths.

//Market

Market: NEV is the route for China albeit challenges

A Shanghai-based analyst calculated that to fulfil the 20% target, China’s NEV sales will be growing to nearly 6 million units annually at the present sales level, which has been far beyond today’s level.

Over January-September, NEVs sales totaled 734,000 units, or accounting for only 4.3% of China’s total new auto sales, according to the latest statistics from the China Association of Automobile Manufacturers (CAAM). 

To help boost NEVs sales, starting 2021, Beijing will request those eco-sensitive regions and eco-friendly trial zones to buy NEVs for its 80% of newly-added vehicles for public transportation, taxis or for logistics services, as stated in the notice.
The subsidy on NEVs has been extended until 2022 to fend off some of the pandemic impact, but the amount will be trimmed 10% on year for 2020, another 20% for 2021 and a further 30% on for 2022 in general though those in the public transport will see the amount cut by 10% only starting 2021 and a further 20% reduction for 2022, which, together with the higher qualification bars for NEV models to enjoy such subsidies, is the clear signal from Beijing to initiate the domestic automakers for technological upgrading, market sources interpreted.

By September, China had installed 42,000 charging stations with 1.4 million charging piles in total, and the ratio of piles against NEVs on the road was at 3.1:1, Xin Guobin, the vice minister of China’s Ministry of Industry and Information Technology, shared at a press conference on November 3.

China Car Sales Go From Strength to Strength as Virus Eases

Retail sales of cars, SUVs and multiple-purpose vehicles increased 8% from a year earlier to 2.02 million units in October, the China Passenger Car Association said Monday. Wholesales of new energy vehicles, which includes electric cars, more than doubled to 144,000 units.

//Policy

Implementation Opinions of the
General Office of the State Council on Promoting the Innovative Development of Foreign Trade

Strengthen organization and implementation. Strengthen the party's overall leadership over foreign trade work. Give full play to the role of the State Council's inter-ministerial joint conference system for promoting high-quality trade development, and promote the overall innovation and development of foreign trade. The Ministry of Commerce should strengthen coordination and guidance with relevant departments, and all localities should implement it. Report important situations to the Party Central Committee and the State Council in a timely manner.

Comment: The CCP taking control of exports.

Chinese cities race for subsidies in fuel cell gold rush

China's push to promote hydrogen fuel cells as the next big thing in the auto industry has led to a slew of ambitious plans to develop the sector as local authorities vie for hundreds of millions of dollars in incentives.

State-owned SAIC Motor, based in Shanghai, recently announced its first medium-term strategy for fuel cells. The automaker aims to roll out at least 10 models and gain the capacity to produce 10,000 vehicles per year by 2025, and will shift to domestic sourcing as it looks to become globally competitive by 2030.

SAIC's announcement represents part of a plan by the Shanghai government, which oversees the automaker, to cultivate the city's fuel cell industry. The municipal government said last month that it aims to have 10,000 fuel cell autos in use by 2023 and build up the sector's output to 100 billion yuan ($14.9 billion).

The Chinese government has subsidized purchases of fuel cell vehicles for some time. A hydrogen-powered bus, for example, can qualify for as much as $100,000 in local and central government incentives in some cases. Yet a total of just 7,200 or so fuel cell vehicles had been sold as of this past July.

China seeks to make all new autos sold in the country "eco-friendly" by 2035, with "new-energy vehicles" such as electrics and hydrogen-powered cars making up half the total, according to a road map announced Tuesday. The government aims to boost cumulative sales of fuel cell vehicles to 1 million by that year.

Comment: Fuel cells may beat batteries. Toyota have been on it for more than 20 years.

Related:

Why Fuel Cells Lead The Road to Long-Term Sustainability for Vehicles

Fuel cells have now been under development for several decades. Since I first became interested in fuel cells in the 1990’s, I have seen waves of excitement and investment followed by periods of skepticism and disillusionment. Only a few companies have stayed in the game, with Ballard in Canada and the large automakers such as Toyota being a critical and essential part for keeping fuel cell technology funded and growing. Several notable people, such as Elon Musk, have made negative comments about fuel cells calling them “silly and inefficient.” Although I respect Musk’s opinion, there is a place for both technologies in our energy supply and infrastructure. Of course, it is easy to plug-in a car, but that does not mean the fuel cells are silly.

Hydrogen is the most abundant element in the universe – it makes up 74% of all matter. Hydrogen is a clean fuel that can be produced abundantly and safely.