CRITICAL MINERALSNot Just Beijing’s Doing: Market Factors Are Also Hitting Rare Earths Prices

By David Uren

Have depressed rare earths prices been engineered by the Chinese state to snuff out non-Chinese rivals before they get going? Or do they simply reflect a weak market, with demand rising more slowly than was expected by the promotors of a slew of new projects?

The chief executive of Australian mineral sands miner Iluka, Tom O’Leary, argues that the Chinese government is manipulating the market.

‘China’s dominance of the rare earths supply chain has led to market failure, and this presents an existential threat to manufacturing in Western and like-minded countries,’ O’Leary told a mining conference in Japan in June.

Iluka is exposed to the weak prices because in April 2022 it committed to build a major rare-earths processing plant it its mineral sands operation at Eneabba in Western Australia. The federal government supported this with a $1.05 billion non-recourse loan advanced through its Critical Minerals Facility.

The project was budgeted in 2022 to have a total cost of $1.2 billion, but in February this year the company revealed the cost had blown out to between $1.7 billion and $1.8 billion. It has been in talks with the government about further support, but at current prices the venture looks troubled.

Since early 2022, the price of the key rare earth for making powerful magnets, an oxide of neodymium and praseodymium, has dived from US$145 a kilogram to US$47.  O’Leary, who argues the Chinese government has engineered the price fall, says that at current prices no rare-earths operation can be profitable anywhere.

It can be argued that in early 2022 rare earth prices were in bubble territory. Prices tripled in 2021, with most of the rise occurring in the last few months of the year; they’d spent most of the period from 2012 roughly where they sit now.

Fundamental reasons for a fall in rare earth prices from the early 2022 peak include the disappointing sales growth in plug-in electric vehicles over the past two years and the general slowdown in the Chinese economy.

Mine production, by contrast, is rising rapidly. US data shows a huge surge in production in Myanmar from 12,000 tons in 2022 to 38,000 tons last year, while official Chinese production rose from 210,000 tonnes to 240,000 tons.