Atlantic demand for rare earth products remains lacklustre heading into 2024 and is likely to remain so until economic conditions strengthen, enabling multiple end-use sectors to ramp up operations.
Overall, 2023 was more challenging than expected, with the second half of the year failing to deliver the economic upticks that many market participants had initially hoped for. Summer came and went, accompanied by the usual slowdown in trade and — on this occasion — an apparent bottoming out of Chinese rare earth prices. But the arrival of autumn did not bring the usual rebound in activity, and spot trade in the Atlantic has remained thinner than average to the end of the year.
Most end-use sectors continue to navigate a tough environment, compounded this year by additional localised factors. In Europe, the ceramics and glassmaking industries have been hit hard by energy costs, and the region still faces supply risks for gas and electricity that could worsen if the EU introduces problematic price caps.
In the US, the automotive industry was rocked by strike action after the United Auto Workers union went head-to-head with Ford, General Motors and Stellantis over the terms of a new labour contract in September. And across the Atlantic, the offshore wind industry has had a bruising year amid increased costs and supply chain woes.
Rare earth prices did stage a few rallies in the second half of 2023, but these were underpinned by dynamics specific to China and usually short-lived because underlying demand remains sluggish while China's production quotas have risen.
At the time of writing, prices for min 99pc neodymium metal are at $77.70-78.70/kg fob China — down from a recent peak of around $91.30/kg from 9-16 October — while prices for 99.5-99.9pc neodymium oxide have dropped to $63.80-64.80/kg fob China from $74.30/kg over the same period, Argus data show. Praseodymium oxide has followed a similar trend, last assessed at $64.80-65.80/kg fob China, down from around $73.30/kg in mid October.
The heavy rare earths have been more choppy, bolstered periodically by Chinese stockpiling drives but still facing pressure from weak demand further downstream and ample ore supply from Myanmar. Dysprosium oxide has managed to hold its ground at higher levels — last assessed at $362-367/kg fob China, which puts it roughly $5/kg higher than this time last year. But terbium oxide has dropped to $1,040-1,060/kg fob China, down from a recent peak of $1,200/kg on 12 September.
Overall, this year's lower rare earth prices have been welcomed by end users in the Atlantic, especially after the extreme price spikes of 2021-22. However, for those caught in the middle, such as traders, it has been increasingly difficult to achieve healthy margins and there is little room to take speculative positions, according to sources.
Price cuts have also underscored how volatile the rare earths market is and the added difficulties this creates for potential new producers. In a year that has seen rising political support for Europe's critical minerals industry and pledges to accelerate permitting processes, it is still very tough for early-stage project developers to access enough financing, in part because volatile prices mean low visibility on future earnings.
Looking to 2024, most market participants have taken a cautious approach to volumes in their long-term contracts — hoping for an industrial bounce back but wary that conditions may remain challenging for the next few months at least.
Global interest rates are widely slated to drop in the coming months but so far there has been little change. And the Eurozone is still struggling to pull itself out of a particularly deep malaise. The Hamburg Commercial Bank eurozone manufacturing purchasing managers' index reading stood at 44.2 in November and has not been above 50 — the threshold distinguishing contraction from expansion — for 17 months.
Europe's automotive industry is growing, logging a 16th consecutive month of expansion in November, according to the European Automobile Manufacturers' Association. Almost 10 million new car registrations were made in the EU in January-November 2023, up by 15.7pc from a year earlier.
That said, last year's figures provide a pretty low baseline against which to measure growth. And going forward, the EU's automotive industry is unlikely to have an easy ride given fierce competition from China, bolstered government incentives for the US automotive industry, looming net zero targets and unresolved questions around Brexit.
Earlier this month, the EU and UK voted to extend the current rules of origin for battery and electric vehicles to 2027, a move widely welcomed by the automotive industry as it delays the imposition of a 10pc tariff on EV sales between the two areas. But the longer-term question of Brexit-related tariffs remains and highlights the need for a coherent industrial strategy to boost EV manufacturing in Europe.
