Ucore Rare Metals (UCU-V) pop Friday... Chinese tighten supply of rare earths as Terbium and Dysprosium prices soar.
China’s rare earth elements prices trending northward is affecting most of the market participants in the country. Today’s rare earth price index, compiled by the Association of China Rare Earth Industry (ACREI), has been reported at 144 points, an increase of +8.43% over the record low of 132.8 points in 2014 (Source: ACREI’s spot price index).
Rare earth prices are on an uptrend in 2015 as market participants hold a widely held upbeat outlook for China’s rare earth industry. In addition to the positive outlook, the market is looking forward to enjoying a “policy dividend” as a national strategic industry and a flourishing rare earths functional materials industry builds.
The reason behind the rising rare earth prices are undoubtedly the structural changes in the rare earth market, as well as a rapidly growing demand for rare earth magnets and a in the country.
There is a clear correlation between the rare earth metals prices for those used in permanent magnets versus other applications. For instance, price of Terbium and Dysprosium are soaring and the Praseodymium-Neodymium Oxides and the ion-absorption-types for medium and heavy rare earths concentrate also are climbing. This said, Ytterbium oxide and Yttrium europium oxide staged sharp declines during the same time.
Since November 13, 2014 Terbium oxide prices have risen substantially over the last two months amid tight supplies because of strong demand from rare earth magnets market. With mainstream traded prices (tax included) up +47.73% from RMB (2,568-2,650yuan/kg to RMB 3,800-3,900yuan/kg). The impact of this stellar upward trend in pricing is impacting supplier — who are now holding their supplies: reluctant to sell at current prices. The belief is that prices will continue to drive up until at least after the Chinese Lunar New Year holiday.
Additionally, the China’s State Bureau of Material Reserve (SBMR) is planning on proceeding with a new round of rare earth stockpiling after the Chinese Lunar New Year holiday. Dysprosium oxide prices have already shown a signi?cant rise in the past two months, with an increase of +21.52% already in 2015 (RMB 1380-1459yuan/kg to RMB 1700-1750yuan/kg). The market expects the supply of dysprosium oxide to further tighten, which suggests that the price will remain strong.
On the contrary, from the same time period (Nov 13, 2014-Feb 13, 2015) primarily due to a supply glut and limited purchases from end users, prices for Ytterbium oxide, Yttrium europium oxide, Gadolinium oxide and Europium oxide dropped 37.08%; 35.59%; 31.25% and 24.19% respectively. This said, it seems that the prices of these rare earth elements have been stabilized and might be effected by the demand for Terbium and Dysprosium.
The table below provides details of the spot prices of rare earths in China in November 13, 2014 and in February 12, 2015 (tax included), which source from ACREI’s Official website. 
Part of the positive impacts being felt on the rare earth industry are due to Chinese authorities cracking down on illegal rare earth mining, production, evasion of taxes and fees and other violations in the industrial chain. Moreover, a completion of the integration of the rare earth upstream market, the six giants will dominate China’s rare earth production. These six companies are enhancing industry concentration and have increased market efficiency.
In the meantime, Chinese analysts widely hold a positive perspective on the rare earth industry thanks to the government’s determination and efforts to regulate the industry.
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