Following the discovery of a super-rich rare-earth deposit off Japan’s Minamitorishima Island, and given North Korea’s recent indications of a policy shift toward economic openness, countries are now eagerly eyeing the abundant rare-earth resources believed to be hidden within North Korea.

　　The topic of rare earths consistently ranks at the top among major manufacturing industries, particularly attracting heightened attention in sectors such as aerospace, aviation, electronic information, steel, nonferrous metals, mechanical engineering, and agriculture, forestry, and animal husbandry. As an indispensable and vital raw material for modern industry, rare earths are also referred to as "the MSG of industry."

　　Although called “rare earths,” these elements are not actually scarce. According to data from the U.S. Geological Survey in 2015, global reserves of rare earth elements—measured in terms of rare earth oxides (REO)—total 130 million tons. Of this total, China holds 55 million tons, Brazil 22 million tons, Australia 3.2 million tons, India 3.1 million tons, Malaysia 30,000 tons, and the United States 1.8 million tons. The remaining countries together account for 41 million tons. Just how large is a reserve of 130 million tons? To put this into perspective, let’s compare it with the reserves of other metals: global silver reserves are approximately 530,000 tons, while global tin reserves stand at about 4.8 million tons.

　　So why are they still called “rare earths”? Actually, the reason for this name is that, unlike other major metals, rare earth elements are distributed extremely sparsely and often occur in conjunction with a wide variety of other mineral deposits. Because extracting rare earths requires extensive stripping and involves separating them from numerous coexisting elements, the smelting and separation processes generate large quantities of fluorine-containing toxic exhaust gases and nitrogen-rich wastewater. These emissions cause significant environmental damage. As a result, countries in Europe and the U.S. generally rely on imports to obtain rare earth elements.

　　China ranks first in the world both in reserves and production of rare earths. Not only are its reserves abundant, but it also boasts a comprehensive range of mineral types and rare earth elements, high-grade rare earth minerals, and a rational distribution of mining sites. However, as China has ramped up its rare earth mining activities, the problem of severe overcapacity in domestic rare earth production has become increasingly prominent. According to relevant data, the country’s rare earth production capacity, expressed in terms of oxide equivalents, has reached as much as 320,000 tons. Coupled with the commissioning of facilities operated by foreign companies, the market supply far exceeds the global annual demand of 120,000 tons. Moreover, the actual production capacity is even significantly higher than the total production quota set by the government—partly due to illegal and unauthorized mining activities.

　　China has been stepping up its crackdown on illegal mining of rare earths. Since 2013, the government’s efforts to combat clandestine and unauthorized rare earth mining have steadily become more effective. At the same time, rare earth prices have plummeted, and domestic production of rare earths is now on a downward trend. Yet despite this intense pressure, there are still unscrupulous individuals who dare to take the risk.

　　With the recent tightening of the national crackdown on environmental protection issues, many substandard rare-earth factories have been forced to shut down, and numerous rare-earth separation enterprises have gradually suspended production for rectification. Influenced by the expanding scope of domestic environmental inspections and follow-up reviews, the prices of rare earths have been steadily rising.

　　On June 15, SMM published an article titled “SMM Analysis: Rising Numbers of Separation Plants Reducing or Halting Production Drive Up Rare Earth Prices,” which stated, “This week, prices for domestic rare earth products—including praseodymium-neodymium oxide, dysprosium oxide, terbium oxide, and gadolinium oxide—continued to rise. This upward trend is driven by the expanding impact of China’s environmental inspection follow-up measures and the growing number of enterprises reducing or halting production due to previously low oxide prices. As a result, prices for some oxides continued to climb this week, and market transaction activity remained relatively robust.”

　　Wu Xiaofeng, a senior analyst in the rare-earth industry at SMM, believes that recently there has been an increasing number of rare-earth separation companies reducing or halting production. Besides the impact of environmental inspections—particularly the “look-back” initiatives that have affected some non-compliant small and medium-sized enterprises—several large separation companies have also cut back on or suspended production. This is mainly due to the continuous decline in oxide prices this year, which has led to a situation where mining costs exceed selling prices, resulting in losses for producers. As a result, these companies are reluctant to sell their products at low prices. Instead, they’re taking advantage of the sluggish market conditions to carry out equipment maintenance, mitigate risks, and hopefully provide some support to stabilize and boost market prices.

　　Wu Xiaofeng expects that, at present, the reduction or suspension of production by enterprises will not end soon. In the short term, rare-earth prices are likely to remain strong and continue to rise, though the extent of the increase will depend on downstream demand and actual purchasing needs.