Rare earth prices set to keep on the boil after sharp rally

LONDON (Reuters) - Prices of rare earths needed for electric vehicles (EVs) are set to keep sizzling this year on the back of buoyant sales of EVs, uncertainty about supply from Myanmar and razor-thin stockpiles.

FILE PHOTO: A mining machine is seen at the Bayan Obo mine containing rare earth minerals, in Inner Mongolia, China July 16, 2011. REUTERS/Stringer

The Chinese price of praseodymium-neodymium alloy used to make super strong magnets used in EV motors doubled last year and has already shot up more than 10% so far in 2022 to 1.17 million yuan ($184,072) per tonne.

China’s industry ministry met automakers and battery companies last month to discuss surging prices of rare earths.

GRAPHIC: China's Rare Earth Prices Skyrocket,

“The situation is as tight as it has ever been,” said Ryan Castilloux of consultancy Adamas Intelligence.

“The industry just operates hand to mouth and demand gets stronger month after month.” He declined to give specific price forecasts because of their volatility.

China is the world’s dominant producer of rare earths, a group of 17 minerals used in EVs, wind turbines, and military equipment, but relies on Myanmar for around half of its heavy rare earth feedstock.

Its rare earth imports from Myanmar dried up for several months last year after the closure of a key border crossing to contain the spread of the novel coronavirus.

The border reopened in late November, but political instability in Myanmar after a military coup last year adds to uncertainty about supply, analysts said.

“It remains fragile, both politically and the health dimension, and that should be a concern for the magnet industry,” Castilloux said.

Permanent magnets made from rare earths are used in most motors used to power EVs, a sector that has seen sales boom as automakers seek to slash carbon emissions.

Global sales of EVs more than doubled in 2021 here to 6.6 million, more than tripling their market share from two years earlier, according to the International Energy Agency.

GRAPHIC: Chinese Electric Vehicle Sales Soar in 2021,

Gary Gao at data provider Shanghai Metals Market said they expected rare earth prices to remain strong until at least 2025.

“Policymakers (in China) think that the current price for REE (rare earth element) oxides is somewhat undervalued,” he told a webinar.

Recognising strong demand, China increased by 20% the first batch of 2022 quotas for domestic rare earth mining production.

GRAPHIC: China Rare Earth Producer Prices Highest Since 2011,

($1 = 6.3562 Chinese yuan renminbi)

Reporting by Eric Onstad; Editing by Emelia Sithole-Matarise