Rare earth shares surge on import restrictions

Prices of rare earth firms listed on the A-share market surged on Monday after reports that China has extended the ban on imports of medium-to-heavy rare earths, including dysprosium oxide and terbium oxide, from Myanmar.

Share prices of Innuovo Technology Co, Ningbo Yunsheng Co Ltd and Yantai Zhenghai Magnetic Material Co Ltd, all rose by the 10-percent daily limit on Monday, though the benchmark Shanghai Composite Index dropped by 0.41 percent to 2870.60 points.

Imports of rare earth-related commodities were halted from May 15 by Tengchong Customs in Yunnan province, the sole entry point for rare earth shipments from Myanmar to China.

According to China Great Wall Securities, Myanmar is one of the main suppliers of medium-to-heavy rare earths to China, accounting for 50 percent of China's domestic consumption of such products in 2018.

According to Baiinfo, the intelligence service provider for raw materials in China, the average price for dysprosium oxide reached 1.64 million yuan ($237,234) per metric ton on Friday, up 30,000 yuan per ton from a day earlier. The average price for terbium oxide jumped to 3.375 million yuan per ton, up 50,000 yuan per ton from the previous day.

Industry insiders believe that with the curbs on medium-to-heavy rare earth imports from Myanmar, coupled with tighter domestic regulations on environmental protection and raising tariffs from 10 percent to 25 percent on rare earth imports from the United States, rare earth prices are expected to climb in the short term.

The curbs will definitely drive up the prices of rare earths as imports from Myanmar account for half of China's total annual imports, said Zhu Yi, a senior metals and mining analyst with Bloomberg Intelligence.

However, despite the price spikes in the short term, Zhu believes a balance will be reached in the long term as China is likely to increase imports from other countries to satiate rising domestic demand.

If imports from Myanmar stop, China will have to turn to other countries like Thailand, Russia and India for rare earth ores and products, she said.

According to Bloomberg, in addition to Myanmar, Australia, Russia and Thailand are all major rare earth suppliers for China.