RE:RE:REE shutdown expanded: Port closed Research Report on China's Rare Earth Industry, 2019-2023”
Rare earth elements and metals are widely used in the industry. Rare earth elements are
essential to aircraft engines, mobile phones and drill bits for oil and natural gas mining.
As new energy vehicles are expected to replace traditional fuel vehicles, both military and
civilian industries have robust demand for rare earth.
In 2017, China produced more than 80% of rare earth metals and compounds in the world.
rare earth exports to the United States accounted for 78% of U.S. rare earth imports while
the rare earth from Estonia, France, and Japan only accounted for 14% in total. In 2017,
the United States imported more than 17,000 tons of rare earth compounds, of which
10,000 tons of lanthanum compounds and 3,600 tons of cerium compounds were from
China.
Driven by low mining costs (including low labor costs) and low environmental protection
costs, in the 1990s, Chinese enterprises started mining and exporting rare earth on a large
scale. Consequently, most other countries stopped mining rare earth. In the past decade,
China's rare earth reserves fell sharply. Its proportion in the global rare earth reserves once
exceeded 70% while at the end of 2016, the proportion was only 37%.
To regulate rare earth mining, in the second half of 2018, the Chinese government began
to shut down illegal mining enterprises and cut rare earth production quota to 45,000 tons,
down 36% from 70,000 tons in the first half of the year. To upgrade its rare earth industry,
China shifts from exporting crude ores to exporting oxide products, which greatly impacts
the global rare earth market.
After China Minmetals Rare Earth (Ganzhou) Co., Ltd. and CHALCO Guangxi Branch
stopped producing rare earth ores because they failed to meet environmental protection
standards, ionic rare earth ores fell short of demand in southern China.
Subsequently, Chinese mining investors mined ionic rare earth ores in Myanmar and
Vietnam and exported the mined crude ores to China for refining. However, in early
Nov. 2018, all levels of government in Myanmar prohibited the rare earth mining
activities of Chinese enterprises because of the uneven distribution of benefits.
In response, China's Yunnan Customs announced that it would ban all mineral imports
from Myanmar. If the policy is strictly implemented, the prices of heavy rare earth such
as dysprosium and terbium will increase on the global market. But it is uncertain how
long the import restriction will last and how it will affect the volume of China's heavy
rare earth imports.
China Has Been the World's Largest Exporter of Rare Earth for Years
In 2018, China's rare earth oxide imports reached about 41,400 tons, increasing by over
100% YOY. Meanwhile, the domestic production of rare earth oxides shrank as China
combated illegal rare earth production. China's rare earth imports are mainly minerals
and chemical concentrates from Myanmar and the United States. In 2018, China imported
about 26,000 tons of rare earth carbonates from Myanmar, which accounted for about
25% domestic demand. The heavy rare earth from Myanmar accounted for nearly
one-third of domestic consumption.
U.S. enterprises ship lanthanum-rich ores to China and then buy oxides and chemical
products from China. The United States is the major buyer of China's rare earth, and
lanthanum is used to refine oil. Last year, Myanmar became a key supplier of the
dysprosium, terbium, and gadolinium to Chinese producers of magnets and alloys.
In 2018, the United States announced import tariffs on China's rare earth in its trade
frictions with China but later it withdrew this decision. In the long term, China's rare earth
imports will continue to grow. In addition to the United States and Myanmar, Australia
is also exporting rare-earth to China.
In 2018, the production volume of neodymium-iron-boron permanent magnets in China
increased by 5% and the consumption increased by about 6%. The supply and demand
in the domestic market were close to balance. The export volume and export value
increased by 11% and 14% respectively.
In 2018, China only approved 115,000 tons of rare earth production quota, giving priority
to meeting domestic demand. As a result, the global production of primary rare earth
oxides grew by 20.80%. The growth was mainly attributable to the United States and
Myanmar. On the other hand, since China started combating illegal rare earth mining
in Sept. 2018, illegal rare earth production decreased by 50%. The consequent
market gap is filled by other countries. The concentrate imports from Myanmar
have become an important source of the dysprosium, terbium, and gadolinium
for China's magnet and alloy manufacturing industries.
The mining and refining of rare earth in China is monopolized by six major state-owned
enterprises (SOEs). Non-SOEs only have access to downstream industries such as
the production and application of rare earth materials, namely, permanent magnet
materials, catalytic materials, luminescent materials, polishing materials, and hydrogen
storage materials.
With the rapid development of global high-tech industries, rare earth are being applied
to more high-tech fields and the consumption of rare earth new materials is growing
rapidly. The new energy vehicle industry, the wind power industry and other
consumers of rare earth all have a promising future, which promotes the development
of the rare earth industry.
For example, in 2018, the global production of new energy vehicles exceeded 2 million
units, among which 1.27 million units were produced in China, up by about 60% YOY.
Rare earth hydrogen storage alloys are mainly used in NiMH power batteries.
A hybrid electric vehicle needs about 10 kg of hydrogen storage alloy.
In general, a hydrogen storage alloy contains 30% mischmetal, which means that
a hybrid electric vehicle consumes about 3 kg of rare earth. The drive motor of a
hybrid electric vehicle consumes about 1 kg to 3 kg of neodymium-iron-boron
magnetic materials; the drive motor of a battery electric vehicle consumes about
5 kg to 10 kg.
According to the plan of the Chinese government, the annual production of new
energy vehicles in China will reach 6 million units in 2023. If this goal can be
achieved, new energy vehicles will consume 30,000 tons of rare earth or more,
which will boost the development of China's rare earth industry.
The Sino-U.S. trade war has little impact on China's rare earth industry. For example,
in May 2019, the United States again decided not to impose import tariffs on
China's rare earth and other key minerals. It shows that the United States still
relies heavily on China's minerals to produce consumer electronics, military
equipment, and many other products.