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Rare-earth prices surge on higher demand, supply constraints

Rising green car production drives up demand for rare-earth magnets

China produces about 80% of the world's rare earth supplies.

TOKYO -- The prices of rare-earth metals used in motors for electric and hybrid vehicles have increased significantly due to supply-demand imbalance.

Spot prices for neodymium, a key element of magnets found in electric motors, are hovering around $95 per kilogram as of mid-September. That marks a 90% spike from a year earlier, and an 80% jump from the start of the year.

Terbium, another magnetic element, sits at around $600, up 36% from November last year.

"Demand for rare earths for magnetic applications continues to be robust in Japan and China," said Yoshikazu Watanabe, president of Tsukushi Shigen Consul, a natural resources consulting firm.

Trade inquiries for neodymium and other rare earths used in motors for vehicles and industrial robots remain strong.

As a part of efforts to enforce environmental regulations more rigorously, the Chinese government suspended operations at substandard rare-earth smelting works this year. This made an impact, since China is the main supplier of rare-earth magnet materials.

Furthermore, some traders are believed to have held off on selling their stockpiles in anticipation of higher prices down the road. These and other factors conspired to drive up rare-earth prices sharply in July.

Prices have leveled off somewhat in recent weeks, in part because Beijing's environmental enforcement has let up. However, "there is a good chance that neodymium prices will increase again when considering the actual demand," said Yuji Tanamachi, president of IRuniverse, a Tokyo research firm for the metal industry.

Neodymium "may even temporarily approach $200," said a source at a magnet manufacturer.


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