On 20 May 2019, Chinese President Xi Jinping inspected JL MAG Rare-Earth in East China’s Jiangxi province. JL Mag is one of the key rare earth producers in China, specialising in rare earth permanent magnet materials for wind turbines, electric vehicles, automotive accessories, inverter air-conditioning, energy-saving elevators, robots and intelligent manufacturing.
Industry participants and spectators alike have speculated how the Chinese government could use rare earths to counter against US President Trump’s tariffs and, within the scope of the Chinese-US trade war, President Xi’s visit has reverberated across the whole rare earths industry. Rare earths are gaining attention for their role in magnetic materials for electric vehicles and wind turbines and much of the global rare earth demand has been captured by Chinese downstream industries, especially to produce magnets.
Nevertheless, in the aftermath of President Xi’s visit, prices for rare earths magnet materials Nd, Pr, Dy and Tb have surged dramatically. In reality, however, the price surge is being driven by a number of factors, some of which fall outside of the scope of the trade war.
Firstly, the Tengchong Yunnan to Myanmar port has been closed formally, with no indication of re-opening in the short term, which has prohibited all rare earth material trading since 14 May 2019; this follows a buffer period since its first closure in November. In addition, Dy and Tb prices were relatively low in 2018 and many southern separation plants chose to hold on to stocks to reduce a loss on operating costs. President Xi’s visit to JL Mag has drawn further attention to the relevant listed rare earth magnet companies, which saw stock prices increase over the last week. Magnet producers have seen a growing interest from domestic and international markets in the wake of President Xi’s visit, evaluating the role of rare earths in the Chinese supply chain for electric vehicles and new-energy applications.
The fundamental effect of rising rare earth prices is being transferred on to the Chinese downstream industry, which is already experiencing a general slow-down on a global economic scale. The scope of sustainable price increases will be determined by end-user applications and the ability to absorb the price rise or transfer increased costs on to consumers.