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China’s crazy rare earth market returns

Rare earths are loaded on to trucks at Lianyungang port in Jiangsu province in this file photo from AFP. Chinese officials are eager to stem the rise in rare earth prices, as well as many other commodities.

(ATF) Trading on China’s A-share market saw very active movement by “central government heavyweights” in the state-owned sector on Tuesday November 3, which was so positive that China Fund news said the markets ‘exploded!’

It said 150 billion yuan worth of investments came from what the paper termed “bank aristocrats” who had increased their daily limits, “and the crazy ‘rare earth’ market is back!”, the newspaper shouted.

The volatility stems from new measures the Central Deep Reform Commission adopted to set the tone for A-share reform. Among them are new rules for delisting firms.

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According to the Securities Times, the China Securities Regulatory Commission (CSRC) and exchanges are learning from the delisting reform experience and stepping up efforts to improve their revision of delisting rules.

The CSRC will continue to maintain “zero tolerance” for all types of illegal and criminal activities regarding securities, it said. The high-pressure situation would effectively increase the cost of illegality, purify the market ecology, protect the legitimate rights and interests of investors, and promote the high-quality development of the capital market.

Rare earth prices tipped to rise

As A shares rise, the momentum floats all boats and on the day periodic stocks such as the rare earth index, rare earth permanent magnet index, and cobalt ore index also climbed higher. Among them, the rare earth index rose by more than 6%, the Northern Eare Earth in the sector rose by more than 8%, plus China Minmetals Rare Earth and Xiamen Tungsten rose by more than 7%.

ZT5.com reported that rare earth and other sectors rose by more than 3% overall.

On November 3, the Shanghai and Shenzhen stock markets opened higher, and all major sectors rose across the board, with non-ferrous, semiconductor, and rare earth sectors rising by more than 3%.

Some rare earth firms hit the daily limit, such as Northern Rare Earth and Yinhe Magnets.

CITIC Securities believes that the price of rare earths in the fourth quarter may increase steadily. 

The largest application direction of light rare earths, especially neodymium iron boron – which is mainly used in automobiles, new energy vehicles, wind power, energy-saving inverter air conditioners and other fields – is expected to see a gradual repair of downstream demand, so the price of light rare earths may increase steadily. The profit level is expected to continue to be restored.

For the heavy rare earths, which are mainly considered for downstream demand and national reserve needs, the demand trend is expected to boost prices.

The development of the national reserve is working well for rare earth suppliers and is expected to continue. As the end of the year approaches, purchase and storage efforts may change, and the price of heavy rare earths is expected to remain stable overall.


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Chris Gill

With over 30 years reporting on China, Gill offers a daily digest of what is happening in the PRC.


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