China’s largest rare earth producer has cut off supply.
The Inner Mongolia Baotou Steel Rare-Earth Group, which accounts for nearly half of the world’s light rare earth production, has suspended smelting and separation work for a month. It said in a filing with the Shanghai Stock Exchange that the move was aimed at ‘balancing supply and demand’.
Since summer, some rare earth prices have dropped after recent stark rises. The company wants to use its market power to drive costs back up. RBS estimates a month-long suspension will remove about 5,000 tonnes from the global market.
Sam Berridge, rare earth analyst at RBS, said: ‘We would expect a month-long shutdown from the largest producer in the world to affect prices fairly quickly.’
Reports say Baotou also plans to buy rare earth metals in an attempt to further in ate prices. The company controls 60 per cent of China’s production of the materials after the Chinese government merged 35 local companies into the business. The cost of phosphor has skyrocketed this year, from about £20 a kilo in February to over £300. This has triggered a series of price increases on various fluorescent lamps.
As the cost of fluorescent lamps continues to rise, wholesalers and distributors have contacted Lux to voice their concerns.
A disgruntled wholesaler told Lux: ‘Back in May we purchased more than 13,000 18W two-foot lamps in colour 835 and more than 21,000 36W four-foot lamps in colour 835 from one of the big four. We paid 51p and 52p respectively before WEEE.
‘So of the 51 and 52p there is profit, shipment to UK, logistics, delivery, packaging, marketing, factory costs, raw materials including rare earths and sales office and rep costs. How much of that 51 and 52p went on raw materials? And of those raw material costs, how much was rare earths?
‘It’s a question I have asked the big four and not one has given me a reply, just sent me some blurb about China slapping a huge tax on the materials. Makes you wonder how these now cost £1.18 and £1.27 before WEEE from the same manufacturer.’
Supplier Gerry Knowles of General Lamps said he was unable to give customers prices on future orders. He said: ‘If the manufacturers were savvy, they’d buy from two sources. That’s what I do.’
Supplies of T8s are dwindling, with distributors struggling to get hold of tubes from two leading manufacturers.
In contrast, Crompton Lighting is overstocked and is offering customers discounts of up to 20 per cent.
Manufacturers deny pro teering and are considering alternatives.