Strong demand for rare earth metals expected in China

A recent research report by Shenyin Wanguo Securities, a stock holding company, predicts that Chinese demand for rare earths is likely to see strong growth, reaching 150,000 tons by 2020. The development of wind power and new vehicle industries will boost demand for rare earth metals, alloys of which are used to make strong permanent magnets. In addition, rare earth elements (REE) are used in the manufacture of spacecraft, computer and aviation equipment, electrical power devices, and much more.

At the same time, prices for rare earth metals began to decline back in 2012, which amazed investors, but they believe that this is temporary. These elements were implicated in a general downturn in industrial metals demand, followed by price declines, affecting the rare earths business. It is impossible to separate REE, like any other material, from the general state of the world economy. True, other factors also intervened in this process.

China still controls the global REE market and influences global demand and price. This country has managed to control supplies, having a strong influence on domestic producers through production quotas, production licenses, tax resources, as well as exports through quotas and tariffs. As we know, the World Trade Organization forced China to remove some quotas and tariffs that allowed Beijing to effectively control prices. China should now benefit from deferred demand, especially as China has a near-monopoly and produces most of the REEs.

The Greek crisis is also having a negative impact on the metals market and reveals the most dramatic and deep-seated problems in the global economy. At the same time, the authorities in Beijing are trying to use every chance in monetary and fiscal policy to preserve the markets. However, the Shanghai Stock Exchange has lost 30 percent of its value in the past two weeks.