Rare earth element (REE) prices are unlikely to fall to levels last seen in 2003, according to market participants.
The previous collapse in rare earth prices forced a number of mines outside of China to close down, and many analysts feel that played a main role in the supply crunch that saw prices surge to record highs in 2011. However, attendees of last week's Magnetics 2013 conference in Orlando said they do not expect prices to replicate this trend as China looks likely to stabilize the market through stockpiling, reductions to export quotas and an overall clampdown on black market sales. “China does not want prices to go as low as in the past. In its recent white paper, the government said it wanted to prevent the black market and arbitraging. It wants to prevent the instability seen after the run-up in 2011,” John Ebert, business manager at Yunsheng USA, a producer of neodymium permanent magnets, told Metal-Pages. “Prices over time, like anything, will stabilise when there are more choices. I think it took an act like this to get people off their backsides and do something about it. It will take a few years for the orchard to ripen, but it will bare fruit and it took this act for something to happen.” Jim Herchenroeder, vice president of engineering and North American sales manager for Molycorp Magnequench, a division of Molycorp (NYSE:MCP), underlined this point, noting that China has implemented measures to help prevent drastic price variations. “What we saw in China was actually an exercise in pure economics. There were no regulations on mining or production and any price was a good price,” he said to Metal-Pages. “But now the market is different and it's more regulated in terms of production and it's more stable. So you have to ask yourself, which one do you like better?”