CRU Group, the global mining, metals and fertiliser business intelligence company, have analysed the draft regulation document issued by China’s Ministry of Industry and Information Technology (MIIT) on 15 January 2021, outlining its proposals for the regulation of the country’s rare earth elements (REE) industry, and highlight a number of risks that it poses to global supply chains of these important materials.
Mine operations are liable to face stricter national quotas governing their production volumes. A strong crackdown on illegal production combines with a product traceability system, requiring all Chinese enterprises in this space (and perhaps tangential ones) to upload production and sales data, as well as their packaging and invoice information, onto a tracking system. Environmental concerns are mooted, but, it remains to be seen whether this represents a substantial change of direction, or simply provides pretext for the reduction and/or closure of supply capacity.
Looking at demand dynamics: the state intends to establish a strategic reserve of rare earth resources and products. Any sort of stockpiling is of course good for prices; a national-scale stockpile may well be one of the factors that has sent REE prices soaring since November 2020, alongside international trepidation at the announcement of stronger Chinese export controls. In particular, Neodymium – the key permanent magnet metal underpinning electric vehicle drivetrains – is trading at double the prices seen even in October 2020.
All eyes are watching China along the international supply chain, as it tightens supervision of the Rare Earth Elements industry and again signals the national importance of these elements. The possibility of a second ‘Rare Earths Crisis’, akin to the situation in 2010-11, looms larger than at any time in the past decade
Rebecca Gordon CEO, CRU Consulting