China’s rare earth exports have surged despite a slump in prices, contributing to a global market imbalance. In the first seven months of 2024, exports of rare earths from China, the world’s dominant producer, climbed 7.5% year-on-year. However, prices still fell during that period and are now hovering near their lowest levels in more than three years.
Prices for dysprosium oxide and terbium oxide have dropped by 32% and 26% respectively this year, while neodymium oxide and praseodymium oxide prices have both fallen around 15%. Rare earth producers are now sitting on their own stockpiles of supply, hoping that prices will recover in the short or medium term.
China’s rare earth oversupply issues
China controls the majority of global rare earth production and processing, and is facing an oversupply issue that has driven prices to a three-year low. The country is responsible for 70% of the world’s rare earth ore extraction and 90% of rare earth ore processing, according to a June 2023 report by the Oxford Institute of Energy Studies. The issue of oversupply of Chinese products and materials is a larger trend that has caused market disruptions and concern in the West.
China is already under investigation for unfair trade practices related to market flooding and predatory pricing in a number of countries whose markets have been inundated with discounted Chinese exports. Market analysts believe that rare earth demand and prices will eventually recover, but it won’t be an immediate correction. There is no short-term catalyst that will solve the oversupply issue, but demand is likely to pick up slowly and steadily in accordance with long-term demand growth in key energy transition sectors such as electric vehicles, thin-film solar cells, and wind turbines.
