Weak demand, Fanya auction to weigh on Dy, Tb prices

Prices for dysprosium and terbium are expected to drop further in the short term, in response to lower consumer demand from the magnet sector and a planned auction of rare earth stocks from the bankrupt Fanya metal exchange (FME).

Demand from magnetic material producers has remained low with consumers operating from stocks for immediate demand and watching for further developments before the FME auction at the end of August.

Market participants are concerned that the release of FME's 148,750kg of dysprosium oxide and 4,050kg of terbium oxide stocks is likely to raise spot supplies and cause prices to collapse, given the weak demand from the downstream magnet industry, unless the government purchases the stocks as a national stockpile.

Buyers outside of China have scaled back purchases on a weaker yuan against the US dollar and the lower domestic prices. China's continuing trade dispute with the US has pushed down the yuan by 0.85pc from a week earlier to 7.085 today against the dollar, the lowest since May 2017.

Large-scale suppliers are reluctant to cut their offer prices sharply because of firm ore costs. They expect buyers to return in early September, a traditional peak season, when spot trading activity typically increases with magnet producers eager to replenish stocks to meet a rise in demand from the automotive manufacturing sector.

Prices for 99.5pc dysprosium oxide increased to Yn1,980-2,050/kg ($279-289/kg) on 25 June, the highest level during January-August from Yn1,195-1,225/kg at the start of this year, with prices for 99.99pc terbium oxide rising to Yn4,250-4,300/kg on 24 June from Yn2,920-2,950/kg early this year.

The rise is the result of tight spot supplies and higher ore costs following a ban on ore imports from Myanmar (Burma) in mid-May and the China-US trade dispute. China's President Xi Jinping's visited a rare earths plant in south China's Jiangxi province on 20 May, which market participants interpreted as an indication that Beijing may use rare earths to pressure Washington amid the escalating trade war. Suppliers then withheld material from spot sale in anticipation of much higher prices.

A slowdown in demand from downstream buyers during the summer period weighed on dysprosium and terbium prices, prompting suppliers to cut their offer prices to Yn1,820-1,850/kg for 99.5pc dysprosium oxide on 25 July and Yn3,870-3,900/kg for 99.99pc terbium oxide on 30 July.

The escalating China-US trade war, following Washington's 10pc tariff threat on $300bn/yr of imports from China to be imposed on 1 September, pushed prices for 99.5pc dysprosium oxide higher to Yn1,950-1,980/kg on 12 August and 99.99pc terbium oxide to Yn3,960-4,000/kg on 13 August.

Weaker demand from the magnet sector, the yuan's depreciation against the US dollar and FME's auction of rare earth stocks have outweighed reduced supplies resulting from main suppliers withholding spot sales. Trading firms are eager to cut offers and are cautious about the price outlook considering flat physical demand from downstream buyers.

Prices for 99.5pc dysprosium oxide fell to Yn1,900-1,920/kg today, with 99.99pc terbium oxide down to Yn3,920-3,950/kg. Spot buying activity has been weak, with limited orders done as the direction of the market is unclear.