Are high rare earth prices good for China?

Industry experts worry about substitution–and a possible bubble.

China’s rare earth prices just keep climbing, driving fears of a possible boom-and-bust cycle that experts say would harm global efforts to rebuild rare earth supply chains and reduce reliance on China.

Last month, a price index from the Association of Chinese Rare Earth Industry hit a historic high, breaking 430—roughly double where it was a year ago (link in Chinese). One kilogram of neodymium oxide, for example, now costs around 1100 yuan ($173), up from around 686 yuan ($108) last March (links in Chinese). Analysts predict the upward trajectory will continue through the year.

“The problem is that the whole industry is riding on the prices of magnet materials, which is unsustainable in the longer term,” says Nabeel Mancheri, secretary-general of the Brussels-based Rare Earth Industry Association, referring to highly sought-after rare earth elements neodymium (Nd) and praseodymium (Pr), which are used in neodymium-iron-boron (NdFeB) magnets. If the bubble bursts, Mancheri adds, it would set back non-China rare earth projects and delay global efforts to diversify rare earth production.

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