The exports of rare earth materials from China have significantly increased, even amidst declining prices, leading to an imbalance in the global market. In the initial seven months of 2024, China, the leading global producer, saw its rare earth exports rise by 7.5% compared to the previous year. Nevertheless, prices experienced a downturn during this same timeframe and have now reached levels that are the lowest in over three years.
Specifically, the costs of dysprosium oxide and terbium oxide have plummeted by 32% and 26% respectively this year, while neodymium oxide and praseodymium oxide have both seen a decline of approximately 15%. As a result, rare earth producers are left with substantial inventories, anticipating a rebound in prices in the near or medium-term future.
Challenges of Oversupply in China’s Rare Earth Sector
China maintains dominance in the production and processing of rare earth elements, yet it is currently grappling with an oversupply dilemma that has pushed prices to a three-year low. According to a June 2023 report from the Oxford Institute of Energy Studies, China accounts for 70% of the global extraction of rare earth ores and 90% of their processing. This surplus of Chinese products and materials represents a broader trend that has led to market volatility and unease in Western markets.
China is also facing scrutiny for potential unfair trade practices linked to market saturation and aggressive pricing strategies in numerous countries experiencing a flood of affordable Chinese exports. Market experts are optimistic that demand for rare earths and their prices will eventually bounce back, but they caution that this recovery will not be instantaneous. Although there are no immediate solutions to the oversupply situation, demand is expected to gradually strengthen in line with the long-term growth trends in critical energy transition industries, including electric vehicles, thin-film solar technology, and wind power.
