After nearly three years of soaring prices for rare earth metals, with the cost of some rising nearly thirtyfold, the market is rapidly coming back down.
International prices for some light rare earths, like cerium and lanthanum, used in the polishing of flat-screen televisions and the refining of oil, respectively, have fallen as much as two-thirds since August and are still dropping. Prices have declined by roughly one-third since then for highly magnetic rare earths, like neodymium, needed for products like smartphones, computers and large wind turbines.
Big companies in the United States, Europe and Japan that use rare earths in their manufacturing have been moving operations to China, drawing down inventories, switching to alternative materials or even curtailing production to avoid paying the extremely high prices that prevailed outside China over the summer, executives said at an annual conference in Hong Kong on Wednesday.
As demand for rare earths wilted outside China, speculators dumped inventories, feeding the downward plunge. Cerium peaked at $170 a kilogram, or $77 a pound, in August but now sells for $45 to $60 a kilogram. Prices are negotiated by buyers and sellers directly with one another and reported by market information companies like Asian Metal, based in Pittsburgh.
That is still far above cerium’s price of $6 a pound three years ago, before China, the world’s dominant producer, sharply cut its export quotas.
“We all learned a hard lesson in July and August, how high these prices can go before customers begin yelling,” said Mark Smith, the chief executive and president of Molycorp, the only American producer of rare earths.
He added that rare earth mining outside China remained very profitable even with the price decline, which has brought the market back to the level of last spring.
The sharp decline in demand and prices outside China could create yet another shortage next year, said Constantine Karayannopoulos, the chief executive of Neo Material Technologies, a Canadian company that has its factories in China.
That is because Chinese exporters are unlikely to use all of their export quotas this year — since demand is down — and the Chinese Commerce Ministry has historically penalized exporters that do not use all of their quotas by giving them smaller quotas the next year.
China mines 94 percent of the rare earth metals in the world. Through 2008, it supplied almost all of the global annual demand outside of China of 50,000 to 55,000 tons. But it cut export quotas to a little more than 30,000 tons last year and again this year and imposed steep export taxes, producing a shortage in the rest of the world.
Together with a two-month Chinese embargo on shipments to Japan during a territorial dispute a year ago, the trade restrictions and shortage resulted in prices outside China reaching as much as 15 times the level within China last winter. That created a big incentive for companies that use rare earths in their products to move factories to China or find alternatives.
Executives spoke at a conference in Hong Kong sponsored by two London companies, Roskill Information Services and Metal Events, that have aimed to stay neutral on the trade and geopolitical issues roiling the industry.
Many Chinese companies have halted production this autumn in a bid to stem the decline in prices, several executives said. The Chinese Commerce Ministry has also blocked companies from exporting at prices that it deems too low, setting a minimum price for cerium exports, for example, of $70 a kilogram.
Chinese exporters are on track to use only 20,000 to 25,000 tons of their quotas this year, setting the stage for lower quotas next year, Mr. Karayannopoulos said.
By comparison, industry estimates now put annual demand outside China at a little under 40,000 tons, in part because of conservation efforts regarding rare earths.
Automakers are finding ways to use less neodymium in the magnets of many cars’ small electric motors. Oil companies are finding ways to use less lanthanum in refining, and industries like electronics and wind turbine manufacturing are finding ways to use less dysprosium.