Hot money speculation rare earth "a day's price" Downstream industry may face reshuffle

Downstream industry may face reshuffle

China's rare earth “selling theory” was a hot topic in 2010. After half a year, rare earth prices “flyed up” and created a price myth.

“Almost one day at a price, downstream companies cannot organize normal production. Raw material traders do not dare to accept orders. They do not know how to quote to customers. Prices sometimes even report changes overnight.” China Building and Sanitary Ceramics Association Color Glazing and Raw Liu Ailin, secretary general of the Subsidiary Materials Branch, said. He gave an example: "Before 2010, yttrium oxide was used as the yellow color of one of the three primary colors of zirconium. The price of raw materials has been 80,000 yuan/ton, but the current price has soared to nearly 600,000 yuan/ton."

"The rise in industrial products is extremely abnormal, and the market is still out of market demand. The current rare earth market conditions have not yet stabilized." Liu Ailin said that the prices of several kinds of rare earth oxides needed to produce architectural ceramics have risen a lot this year, and some companies have begun to Reduce or even look for alternatives.

It is not just the production of ceramic-colored glazes. All industries that use rare earths have been miserable for the past six months. This reporter learned that Shanxi has some NdFeB magnetic material companies have stopped production, the current price or will trigger a new round of rare earth downstream industry reshuffle.

The reporter learned from the rare earth trading market that since the beginning of this year, the main elements of light rare earth yttrium oxide and antimony oxide prices have risen by 500%. Among them, the price of antimony oxide has increased from 15,000 yuan/ton at the beginning of this year to about 200,000 yuan/ton at present. .

“The trend of seeking alternatives has already emerged.” Downstream related companies stated that in the field of wind power generators, the magnetic separation method that originally used a large number of NdFeB was abandoned and began to be replaced by superconductivity. NdFeB companies said that inverter air conditioners began to use ferrite instead of neodymium iron boron.

Hot money speculation franchise expectation

The reserves of rare earths in Inner Mongolia account for 90% of the total reserves of rare earths in the country. The focus of the integration of rare earth industries in Inner Mongolia falls on the rare earth leading company Baotou Steel Rare Earth. “Before 2009, due to the disorderly mining of domestic mines and the blind expansion of smelting capacity, the supply of raw materials for rare earths in China has exceeded demand, and many primary products have been exported to foreign countries at a low price.” Vice-President of Inner Mongolia Baotou Rare Earth (Group) Co., Ltd. When Chao Lu, chairman of the China Securities Journal, interviewed, he said that due to the crackdown on illegal piracy and the reduction of export quotas, the tight supply has led to an increase in rare earth prices in the international market, which in turn has driven up prices in the domestic market.

On May 13th, the reporter was informed that Baotou Rare Earth continues to carry out rare earth franchise work this year, and strives to basically realize the monopoly of rare earth resources in Inner Mongolia during the year. The franchise is expected to cause manufacturers and traders to start reluctant to sell, and rare earth prices soar.

Industry data show that in the first quarter of 2011, the price of rare earth oxides soared, with the increase in bismuth oxide by 37%; the increase in bismuth oxide by 124%; the increase in bismuth oxide by 168%; the increase in bismuth oxide by 141%; the increase in bismuth oxide by 161%; and that of bismuth oxide by 104%.

"The listing price is being revised every day." Chao Lu said that there is indeed a phenomenon of speculation orders. Intermediate traders received orders and the price increase was transferred to the next family. "There are some trading companies in the stockpile, breaking the balance of market supply, there is no market price, the volume is very small." Liu Ailin believes that social hot money engaged in rare speculative speculation of rare earth, hoarding supplies, limited reluctant sellers.

It was learned from informed sources that the government of Inner Mongolia Autonomous Region planned to issue the "Inner Mongolia Autonomous Region Upstream Upstream Enterprise Integrated Elimination Work Program" (referred to as "the program"), which will provide administrative power to Baogang Rare Earth's franchise and plans to make packages during the year. Steel rare earth basic realization of franchise.

The "Proposal" proposes that Baosteel's rare earth franchise will be achieved through mergers and acquisitions, compensation closure, and elimination of closure. The rare-earth mining and smelting and separation enterprises other than Baotou Steel and Rare Earth Company in Inner Mongolia Autonomous Region were included in the scope of integration elimination and involved 35 enterprises, including 5 households in Hohhot, 23 in Baotou City, and 7 in Bayannaoer City.

According to industry sources, the exclusive power granted by Inner Mongolia Autonomous Region to Baotou Steel Rare Earth is not limited to upstream resources, but also includes downstream processing and product production.

Rare earth processing companies are calculating a single account: According to the current rare earth price, if a factory uses 20 tons of rare earth for a month, it needs at least 3 million to 4 million working capital per month. If you use base metals, you need 15 million funds. According to the flow of industrial enterprises for 2-3 months, at least 10 million yuan will be required. The industry believes that the average SME does not have so much cash to pay. From the bank may not be able to lend to the funds, SMEs will face "reshuffle" in this round of price increases.

"The purpose of the franchise, in addition to controlling pricing, the local government also hopes to attract rare earth downstream processing enterprises to Baotou, strong rare earth industry." Informed sources said. There are also people in the industry who believe that there are advantages and disadvantages to the franchise: On the one hand, the franchise will enable the leading companies to obtain pricing power; on the other hand, the franchise will violate the principles of market economy competition and will lead to monopoly.

Baotou rare earth enterprise coalition stakeholders said that despite the "Baosteel rare earth franchise" in the wind, but the official documents of the above program has not been issued.

Rare Earth Spot Exchange

In early 2010, the government of Inner Mongolia Autonomous Region approved the “Strategic Reserve Plan for Rare Earth Resources in Inner Mongolia Autonomous Region”, and Baotou Rare Earth took the lead in implementing the strategic reserve plan for rare earth raw materials with a total reserve of over 200,000 tons. Subsequently, the Ministry of Land and Resources delineated Baotou as a reserve base for rare earth minerals, and the trial of rare earth reserves officially began. The "National Collection and Reserve Plan" has brought upward expectations for rare earth prices.

"Current reserves have already started, there are three or four varieties, the state discount interest." Baotou Iron and Steel related to people.

According to informed sources from the industry, as early as the previous two years, Inner Mongolia started to launch a rare earth futures market. The scheme also passed provincial approval, but it was eventually “born dead”.

The industry believes that the reason why rare earth futures have not been introduced has certain reasons. Futures trading varieties must have sufficient market competition. In the future, rare earths will appear to be franchised. If futures varieties are introduced, they are likely to face an inactive situation, making the price discovery function ineffective. In addition, the contract is less liquid. Rare earths are not standardized commodities. Each of the 17 elements has its own characteristics. The market demand is small, and it is difficult to carry out futures trading. Due to the small volume of market transactions, it is easy to trigger capital speculation and the risk of market manipulation will be amplified.

It is reported that Baotou Rare Earth and Baotou Rare Earth High-tech Development Zone are jointly applying for rare earth spot exchanges to the Inner Mongolian Autonomous Region Government and are planned to be established in Baotou.

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