Chinese PrNd mischmetal market outlook keeps optimistic in 2021

Asian Metal: Hello, Mr. Zhang! Thank you for accepting this interview from Asian Metal. Could you please introduce your company and your main business briefly?

Mr. Zhang: Established in May of 2017, Baotou Jinhai Rare Earth New Materials Co. is located in the Rare Earth High-Tech Industrial Zone of Baotou and is one of the key investment enterprises of Baotou. Our company owns a registered capital of RMB5 million (USD0.77 million) and a designed capacity of 3,000t of rare earth metals and alloys. We mainly engage in production and sales of rare earth metals, alloys and rare earth permanent magnet materials. The company has won certification of ISO9001 in December, 2020.

Asian Metal: Thank you for your introduction. Would you please give us a brief introduction of your career?

Mr. Zhang: I have been engaged in rare earth industry for around 18 years since 2003. Now I mainly focus on production and sales of rare earth metals and alloys. I had managed Jinzhou Kunhong New Material Industry Co. for 17 years, which ever accounted for 30% of market share in Beijing-Tianjin Region.

Asian Metal: According to the Chinese PrNd mischmetal price trend curve below, Chinese PrNd oxide and mischmetal prices increased as a whole since October of 2020, especially during mid-November to early December, during which the prices climbed sharply. What do you think are main factors thatimpacted the prices? However, the price increase did not last too long and then declined, why? What's your opinion for the PrNd mischmetal prices trend for 2021.

Mr. Zhang: The main reason that PrNd oxide and mischmetal prices increased since early October of 2020 is that magnet demand increased upon the reviving economy after the global COVID-19 breakout. NdFeB magnet demand continue increasing over the past years, while most companies reduced inventories due to declined demand for various industrial products after the breakout of COVID-19 in China during the Spring Festival holiday and the continuously spread out in US and Europe. However, with the control of COVID-19 in June and July of 2020, global economy revived and the demand for NdFeB magnet, which is a constant barometer of economic climate index, increased. As supply-demand balance changed, the prices of PrNd oxide and mischmetal started to increase after October of 2020. However, the end users did not accept sharply rising prices in short time and delayed purchase, which pulled down the PrNd mischmetal prices in mid-December of 2020. About the forecast of PrNd mischmetal market in 2021, I hold an optimistic attitude and believe that the prices would remain upward trend in short term. Meanwhile, I don't expect sharp price increase again as it is not benefitial to the steady development of NdFeB magnet industry.

Asian Metal: I learnt that your company started pilot production since July of 2020, can you introduce your project's construction process, current production status and the future development plan?

Mr. Zhang: I accepted the invitation of President Haixing Liu, the controller of this company, in May of 2020 and started construction since then. The project will be completed in two phases, with the first phase of 1,000tpy and the second phase of2,000tpy. We started pilot production since 18th July of 2020, and we already finished the phase one by 5th December of 2020 and we plan to finish the second phase by the end of 2021. We adhere to the process for many years with characteristics of high temperature electrolysis, titanium spoon out of the molten salt electrolysis, which can ensure a certain high yield and the purity of rare earth metals. At present, our PrNd mischmetal monthly output of a single 8000A molten salt electrolytic cell can basically achieve more than six tons. Besides, the impurity of iron can be controlled to the average less than one thousandth. Furthermore, the product superior rate stays above 90% and thepass rate reaches 100%. Above all, the total amount of rare earth metal basically reaches 99.5%min, so our product is popular among the majority of NdFeB customers. As the manager of the company, years' experience tell me that only by integrity management, continuous innovation and product quality promotion can we improve the competitiveness of the company. The future vision of Baotou Jinhai Rare Earth is to be a qualified supplier for high performance NdFeB magnet enterprise with perfect solutions of rare earth raw material.

Asian Metal: As a veteran of rare earth metal industry, what have you learned about the production capacity, annual output and inventory of PrNd mischmetal in China in 2020? At present, how about the orders that your company received?

Mr. Zhang: According to the official data, China's production capacity of rare earth metals in 2019 reached 100,000t, of which the actual output of PrNd mischmetal recorded about 45,000t. I estimated that both the production capacity and output in 2020 increased a bit in 2020. At present, most metal plants are focusing on signed orders and spot material supply keeps tight. Since last July when we started production, our company has received a lot of support from new and old customers and there have been continuous orders. And these obtained orders would not be shipped before March of 2021.

Asian Metal: Nationally, with new smelters in Inner Mongolia, Sichuan and Jiangxi put intoproduction over the past two years, will these new capacities enhance competition among suppliers? As a newly built rare earth metal plant, what measures would you take to meet the industry challenges and promote the development of your company?

Mr. Zhang: The actual investment in fixed assets of metal plants is not large, but smelters usually need a large quantity of cash flow. Therefore, I think we still need pay more attention to the analysis of production data, and the production capacity is not so significant. Official data in 2019 showed that China produced around 170,000-180,000t of NdFeB magnet, which is equivalent of 45,000-50,000t of PrNd mischmetal.Besides, China produced around 56,000t of PrNd oxide (including outputs from imported rare earth oreand waste recovery) in 2019, which can be processed to approximately 46,000t of PrNd mischmetal. Just asI mentioned above, the national annual output of PrNd mischmetal achieved around 45,000t in 2019.Comparing with those data, Chinese PrNd mischmetal supply and demand basically kept on a balance in 2019, and the market balance in 2020 did not change much. Thus, the core problem is whether thedemand for NdFeB increases or decreases this year. Of course, since 2011, when the state proposed the integration plan of the six rare earth groups, the results have been obvious. At present, the distribution pattern of upstream raw materials has been completed. As an intermediary enterprise in rare earth industry chain, smelters must face pressures of raw material procurement. Anyway, speaking from anexperienced practitioner for many years, there is no doubt that most industries are under the red sea market now. Therefore, when we facing a brutal market competition, in my opinion, the most basic thing is to be a good supplier with high quality products first, then to reduce enterprise costs, and to improve the core competitiveness of enterprises, so as to survive in the competitive market.

Asian Metal: In addition, there are strong calls in rare earth industry to enlarge or even completely liberalize the mandatory quotas for light rare earth ores. What do you think are the basis of such calls? How do you see to keep the balance between China's domestic and imported rare earth ores?

Mr. Zhang: Let's put it in terms of data. In 2020, the mandatory plan for rare earth ores stayed at 140,000t (REO), and the corresponding oxide for PrNd oxide recorded about 26,000t. Comparing with the above consumption data, it is not difficult to understand the relevant voices in the industry. Currently, value of rare earth products mainly lies in the rare earth permanent magnet industry, so I suggest the rare earth industry supervisors and large rare earth groups to take NdFeB magnet industry's demand as the core to maintain the order of the market, and to balance the domestic rare earth ore mandatory quotas and international import volumes, so that we can promote the healthy development of the rare earth industry.

Asian Metal: As a raw material supplier of NdFeB magnet industry, what's your expectation on Chinese NdFeB magnet industry in 2021? What's the potential impact on the PrNd mischmetal industry?

Mr. Zhang: I believe it would be certain that NdFeB magnet demand increases YOY if there is no such event of epidemic in 2020 and the relevant global economic depression and recession. Now the electric drive market is in full swing and it is the first year in the era of sharing two-wheeled electric vehicles. With the continuous enrichment of people's material life and pursuit of continuous improvement of life and product quality, people would have more demand for energy-saving, environmental protection, light weight and other features of the product, which would enhance NdFeB magnet consumption and expand its application. Besides, there is a lot of space behind the replacement of industrial motors, for example, water pumps. With the increase of NdFeB application, it will promote the consumption of PrNd mischmetal, which is a good news for our upstream raw material companies.

Asian Metal: Thanks for your sharing! Wish you every success in your business!

Mr. Zhang: Thanks for your interview and may Asian Metal be better and better! I hope Asian Metal can keep offering good services to the rare earth enterprises and making further contribution to the healthy development for rare earth industry, thanks again!