The global rare-earth market is attracting attention as it may undergo a dynamic change this year. Let's take a look back at what happened last week and this week.

 

 

Rare Earth Market Overview Roskill Report

　First of all, I would like to introduce the contents of the report on the overall view of rare earths issued by Roskill last week.

 

Currently, demand for rare earths is increasing significantly for two main applications: magnets for HV and EV drive motors and magnets for wind turbines. In particular, demand from wind turbine applications has risen 16% since 2013 due to a significant expansion of wind turbine capacity in China, while demand for EV motor applications has risen 20% since 2013 due to a 53.5% increase in sales of hybrid and electric vehicles. In summary, global rare earth demand for the two main applications (HV and EV/wind) has risen nearly 20% over the past decade.

 

As for the future, demand for magnet applications is expected to grow rapidly, accounting for more than 35% of total rare earth demand by 2030, and supply of rare earths for magnet applications is already tightening by 2020.  On the other hand, the demand for FCC catalysts, polishing powder, and other major applications is expected to decline to 17% and 11%, respectively.

 

Unfortunately, the market's demand for rare earths does not match the distribution of the elements in nature: of the 147.5 ktREO of refined rare earth supply in 2020, only 27% of the total supply was for "magnet" elements such as neodymium, praseodymium, and dysprosium, which are expected to become the mainstay of the market.  On the other hand, lanthanum and cerium are currently in excess supply.

 

In 2020, China accounted for 55% of the world's mined supply and 85% of the world's refined supply, down from more than 95% in 2013. In the background, major producers in Australia, the U.S., and Myanmar are moving to develop mines. China still has the highest share of refining supply at 85%, but recent global trends suggest that this share will soon be decentralized.

 

 

Rare-Earth ETFs Gaining Interest from Traders Since Their Listing in 2010

Next, I will provide an analysis of REMIX (VanEck Vectors Rare Earth/Strategic Metals), a rare-earth representative ETF listed on the NYSE that has recently been attracting a lot of attention in the market.

 

The ETF is an innovative rare earths ETF that gathers 20 leading global rare earths companies, but with about half of the funds going to China and only 10% to the U.S., it also poses a geopolitical risk.

 

 

■List of companies included in REMIX

 

 

Since its listing in 2010, the ETF has traded at low levels for years, with some long-term highs in the metals bull market of 2010-2012 and the bull market of 2016-2018, and has been at risk of fund closure.

 

However, in anticipation of tighter supply due to the recent green energy boom, volume has been gathering and prices have now doubled since November and are on track to reach 2018 highs soon.

 

 

■10-year trend of REMIX

 

 

※1-year trend of REMIX

 

 

While the ETF is gaining momentum, many of the individual rare earths are still slightly below their 2018 peak levels, and experts say that many of the individual companies in the REMIX portfolio do not seem to have valuations commensurate with their performance, suggesting that the ETF may be gaining ground ahead of the market.

 

The two main risks associated with this ETF are that rare earths themselves are prone to extreme price volatility, and that we are still largely dependent on China and its unclear movements. On the other hand, there is a lot of appeal in the fact that we are recently getting rid of our dependence on China and that supply is expected to be tight due to the almost certain increase in demand, so it may become an essential focus in the future.

 

 

New Developments in India with Potential

Next, I would like to report on India, which holds a great deal of potential as a rare earth supply source.

 

India boasts the world's fifth largest reserves of rare earths, almost twice as much as Australia, but it currently produces almost none of them on its own and relies almost entirely on imports from China. Last week, the Indian government granted Indian Rare Earths Limited (IREL), a state-owned company, a monopoly on monazite beach sand, a primary mineral containing REEs. This decision could be a stepping stone towards the country's own production of rare earths in the future.

IREL's main business is to provide thorium extracted from monazite to the Department of Atomic Energy, and it also sells rare earth oxides to foreign companies on a secondary basis, but its REO production in 2016-17 was only 2,265 tons, far from being self-sufficient in supply. The company's decision is believed to be aimed at making its rare-earth production business its mainstay.

Although there are still issues to be resolved, such as the design of a value chain and the expansion of facilities based on a large amount of funds, before establishing a self-sufficiency system, it is estimated that India's rare-earth business will bring nearly $200 billion worth of value to the country's economy.

 

 

Considerations for Myanmar

Finally, let's look at Myanmar, which is attracting attention for its future development.

 

If Myanmar, which is said to be 30-35% dependent on rare earth imports from China, were to halt rare earth production, the impact would be significant. However, according to current reports from various sources, the rare earth mines in Myanmar are under the control of autonomous militia groups and there is no sign of disruption at this time. On the other hand, some experts said that if the U.S. were to impose economic sanctions, the resource would be treated as a conflict mineral and the price might go up.

 

Let's take a look at some of the indicators.

 

The price of terbium oxide dropped by $5 from the high of $1365 per kilogram set last week to $1360 per kilogram recently, but remains high.

 

 

Terbium Oxide Market Trend (99.99% USD/kg FOB China) 10 years

 

 

Praseodymium oxide is still at last week's high of $65,000.

 

 

Praseodymium Oxide Market Trend (99.5% USD/ton FOB China) 5 years

 

 

Ferrozisprosium went from $343 per kilogram last week to $363 per kilogram last week to $358 per kilogram recently.

 

 

Ferrozisprosium Market Trend (99%minDy80% USD/kg FOBChina) 5 years

 

 

Neodymium metal has also not stopped hitting new highs since December 2013, from $109 per kilo on January 25 to 109.2 on February 6 and most recently 109.7.

 

 

Neodymium Metal Quotations (99% USD/kg FOBChina) 5 years

 

 

（IRUNIVERSE　USAMI）