Cai Xiyuan: Oversupplied rare earth market in H2 to remain flat

Asian Metal: Good afternoon, Mr. Cai. Firstly, thank you for granting this interview. Could you please provide a brief introduction of your company’s operating condition?

Cai: Our company owns 15 production lines to separate rare earth concentrate. Now we are running at around 80% of capacity with 12 production lines opened.

Asian Metal: What are the advantages of your company compared with other large producers?

Cai: Supported by abundant rare earth resources of Qingyuan city’s surrounding areas, our company is already one of the major separation plants of Guangdong Province at present. Our clients are spread all over Japan, South Korea, the EU, the US, Hong Kong and Taiwan. In August of 2008, the company signed acquiring contract with Guangdong Rising Nonferrous Metal Group, which is a good-sized and stated-owned enterprise in Guangdong province, and Guangdong Rising Nonferrous Metal Group owns 61% stocks. Cooperating with Guangdong Rising Nonferrous Metal Group brings a steady stream of momentum to the company

Asian Metal: Rare earth has been soft so far this year and rare earth prices, especially middle and heavy rare earth prices, have kept dropping. What do you think about this?

Cai: I think the main reason for falling prices is the combination of oversupply and weak demand from downstream industries. Without support from the downstream market, suppliers have difficulty in concluding transactions. Furthermore, rare earth production expanded a lot in the past two years, which has lead to a furious competition amongst suppliers. Therefore, rare earth prices keep falling.

Asian Metal: As I known, your company provides a great variety of rare earth oxides and the downstream markets contain NdFeB magnets and phosphors powder. How about these downstream markets? What do you predict for this market’s tendencies in H2?

Cai: The phosphor powder market is dim and our clients disclosed that their plants are running at low production now, thus, they are not in a hurry to purchase rare earth materials. The NdFeB magnet industry is a bit better while consumers just make hand-to-mouth procurements of PrNd mischmetal, accordingly, PrNd oxide market sees small deals. In my opinion, it is hard for phosphor powder and NdFeB magnet markets to show obvious improvements in H2 and buyers will continue to adopt conservative purchasing strategies.

Asian Metal：How about your company’s rate of operation?

Cai: As rare earth oxides markets are flat and the prices are declining, we just produce for received orders now to avoid loses caused by further price declines.

Asian Metal: Will your company cease production if the demand remains soft in the coming months?

Cai: We will consider to cease production in H2 if rare earth oxides demand shows further slack tendencies About how long it will be, it’s depends.

Asian Metal: What do you predict for the rare earth market tendencies in H2?

Cai: Rare earth market is suffering from abundant supply and weak demand, therefore, I don’t think the market will show improvement in H2.

Asian Metal: What factors will promote the rare earth market to rebound?

Cai: Personally speaking, I think the rare earth market will not improve and the prices will not stop declining until there is better co-ordination of supply and demand.

Asian Metal: We appreciate your support and your valuable time. We wish a bright future for Qingyuan Jiahe Rare Metal Co., Ltd.