Chinese Regulator Urges Orderly Quotes, Firm Self-Discipline to Rein In Runaway Rare Earth Prices
Xu Wei
DATE:  Aug 09 2017
/ SOURCE:  Yicai
Chinese Regulator Urges Orderly Quotes, Firm Self-Discipline to Rein In Runaway Rare Earth Prices Chinese Regulator Urges Orderly Quotes, Firm Self-Discipline to Rein In Runaway Rare Earth Prices

(Yicai Global) Aug. 9 -- China's rare earth industry staged a dramatic recovery this year, following a five-year market downturn.

The country's regulator is now however trying to put the lid on rare earth prices that have been rising since June.

The nation's rare earth industry administration recently noticed the six leading rare earth producers -- Aluminum Corporation of China [HK:2600], China Northern Rare Earth Group Co. [SHA:600111], Xiamen Tungsten Co. [SHA:600549], China Minmetals Corp. [SHE:000831], Guangdong Rare Earth Industry Group Co. and China Southern Rare Earth Group Co. -- to safeguard stability in the rare earth market, The Paper reported today, citing an industry insider.

The regulator will clamp down on chaotic quotations and acts of hoarding on the rare earth market, calling on the six groups to stiffen self-discipline to restore industry order, schedule rare earth production in line with overall planning, and ensure reasonable pricing, with the goal to help the rare earth sector develop soundly, the document said.

"The office wants to stabilize the market by averting price increases by the six major players," opined a market insider. "However, today's occurrences show rare earth prices still rising despite the notice."

The average price of praseodymium neodymium oxide, a typical rare earth product, has soared 54 percent thus far this year, after growing as much as 36 percent in the last two months alone, statistics show. The government's crackdown on unlicensed producers and its bi-monthly reserve collection policy have partly fueled the ongoing rally of rare earth prices.

The market boom has incited the six leading producers to mark up their listing prices. China Northern Rare Earth Group -- the largest -- has hiked the price of praseodymium neodymium oxide by 53 percent since April, from USD44,000 (CNY293,000) per ton to CNY420,000 now, with a 27.3 percent monthly jump in August alone.

Continuous rises in price floors have persuaded some market participants to start stockpiling rare earth products, with most in short supply or even out of stock, China Merchants Securities wrote in a recent notice. Sellers are turning bullish, scenting further price rises. Downstream businesses have started restocking, but prices have kept up as the ranks of upstream hoarders has grown.

Noteworthy is that spiraling prices may also impact the state's rare earth reserves.

"The government collection price needs to be held in line with market prices, and the groups will be reluctant to sell if the collection prices are unreasonably low," said the market insider. The government called for bids for rare earth stockpile purchases last June, but tenders for all the nine major products failed because the prices did not meet producers' expectations. The government collected an aggregate of 5,900 tons of rare earth through four rounds of stockpile purchases last December and January, and in March and May of this year. The target for the latest round has been set at 15,000 tons, but less 40 percent of the targeted volume has been amassed thus far. The next round, originally scheduled for July, has had to be postponed until further notice.

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Keywords:   MSCI,Regulator