Rare earths miners confident despite price slump, demand concerns

Weak pricing for rare earths and a shift away from the commodity group by some electric-vehicle makers will have little impact on the industry in the long run, executives of major rare earth miners said during first-quarter earnings calls.

Prices for some rare earths, such as neodymium and praseodymium, rose early in the March quarter, but prices across the industry softened in subsequent weeks largely due to weakened demand from China, executives said. China and other major EV markets, including Germany and Norway, recently rolled back EV subsidies, driving down demand for EVs and a variety of battery inputs including lithium and cobalt, Alice Yu, a mining analyst with S&P Global Commodity Insights, said in an April report.

At the same time, rare earths producers are facing a reduction in usage by major automakers such as Tesla Inc. and Nissan Motor Co. Ltd. However, rare earths miners said they are confident that demand for their product will remain high in light of continued use in other energy technologies, including wind turbines, amid limited alternatives.

"Across the quarter ... the price has softened. We all know and expect volatility," Amanda Lacaze, CEO and managing director of Australia-based miner Lynas Rare Earths Ltd., said on an April 21 earnings call. "Our assessment on this is that the current softness is very much about internal China dynamics. But we at Lynas remain very confident of the long-term trend, and we know that the Chinese rare earth firms share that confidence."

Short-term weakness, long-term strength

While price declines in the first quarter may have been larger than expected, long-term rare earths demand will be "explosive," James Litinsky, chairman and CEO of Nevada-based MP Materials Corp., said on a May 4 earnings call. Year over year, MP Materials' net income for the quarter dropped 56.2%, sales of rare earth oxides in concentrate decreased 12.7% and realized prices fell 32.2%, according to the company's same-day earnings report.

"[Neodymium-praseodymium] began the year around $102 [per kilogram], which was down from a 2022 peak of $175. The declines continued throughout the first quarter, with pricing now in the low $60s," Litinsky said. "I would say I'm actually very surprised but not shocked ... commodities do almost anything in the short run."

Litinsky expressed optimism for rare earths sales in the EV sector in the longer term.

"Despite this recent blip, global EV sales penetration is still only in the low teens percentage, so the long-term demand trend remains explosive," the executive said. "We believe the compounding effect of high growth in electrification will far outweigh any legacy or other short-term weakness, and then some, over even a moderate amount of time."

Global passenger plug-in EV sales are expected to reach 29.2 million units by 2027, up 104.7% from an estimated 14.3 million units to be sold in 2023, according to Commodity Insights' April forecast.

Continued demand is also expected from manufacturers of key energy transition technologies such as wind turbines, which has previously caused rare earth price increases.

"The spike of rare earth prices in 2021 was a direct result of massive wind turbine capacity being rolled out in China in the first half of 2021," George Bennett, CEO of UK-based Rainbow Rare Earths Ltd., said on a May 3 earnings call. "We see further capacity being rolled out over the next 10-odd years ... and that will mean very strong demand for permanent magnets in these wind turbines."

Lynas' Lacaze highlighted continued rare earths use in non-Tesla vehicles as another significant driver of demand. Lynas' sales revenue declined 27.6% year over year and total rare earth oxide production fell 12.1% for the quarter ended March 31.

"There have always been technology choices with respect to the use of rare earths, particularly in electric vehicles. However, the neodymium-iron-boron magnet technology is the most energy-efficient because it is the lightest motor," Lacaze said on the April 21 call. "I know sometimes it seems like there's only one electric-vehicle maker, but there are many electric vehicles on the road, and these days there are many different models, and more are choosing the [neodymium-iron-boron] technology than the alternatives."

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