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Demand of Chinese Market For Rare Earth Ore By 2020 Is Expected to Reach 228,000 Tonnes

At the Argus International Rare Earth Annual Meeting 2015 held in Shanghai, Mr. Chen Zhanheng, Deputy Secretary-general of the Association of China Rare Earth Industry, said that currently the rare earth market is at its lowest point since 2011, the market space for further drop is limited, and the situation is expected to stabilize in the near future. Main reasons leading to rare earth price drop are shrinking demand, over supply, capacity surplus and illegal mining. In his view, reasons of capacity surplus mainly include: (1) Smelting separation technology lacks protection of intellectual property rights, the technology threshold is missing; (2) Investors lack comprehensive understanding of the industry and relevant industrial chain, resulting in blind investment; (3) Local government often pursue local interest, and lack vision for overall situation when giving approval to project setup of rare earth smelting separation projects.

Chen Zhanheng said, as the integration of China rare earth big groups made progress, it is well in sight for the rare earth industry to fulfill orderly control. At present, the industrial pattern dominated by large rare earth industrial groups has basically taken shape, and the industry has completed the integration of 77 out of 78 rare earth mining licenses across the nation, together with the integration of 77 out of 99 nationwide rare earth smelting and separation enterprises. Within a certain period in the future, six rare earth groups will further quicken the pace of restructuring for all nationwide rare earth mines and smelting & separation enterprises, especially substantial integration.

Chen Zhanheng pointed out, after resource tax is changed to taxation according to price method, mines in North China is reduced tax burden by approximately 2000-3000 yuan/tonne; for mines in South China, the tax is reduced if the pre-tax price is below 133,300 yuan, and increased if the pre-tax price is above 133,300 yuan/tonne, at approximately 27000-54000 yuan/tonne. It is expected in 2015 the Chinese market’s demand for rare earth ore is 157,000 tonnes, up by 8.3% on Y-o-Y basis, by 2020 it is expected to reach 228,000 tonnes.