SunSirs: Amidst Weak Demand, the Light Rare Earth Market Is Trending Downward

According to the SunSirs Commodity Market Analysis System, domestic prices for light rare earths have recently experienced a significant decline. As of May 20, the SunSirs Rare Earth Index stood at 630 points—a decrease of 12 points from the previous day. This represents a 37.44% drop from the cycle's peak of 1,007 points (recorded on February 24, 2022), while marking a 132.47% increase from the cycle's low of 271 points (recorded on September 13, 2015). (Note: The cycle period covers December 1, 2011, to the present.)

Domestic prices for neodymium oxide, neodymium metal, praseodymium oxide, praseodymium metal, Pr-Nd alloy, and Pr-Nd oxide have all followed a downward trend. As of the 20th, the price of neodymium oxide stood at 770,000 RMB/ton—a decline of 8.33% from mid-month levels; neodymium metal was priced at 950,000 RMB/ton, down 7.77% from mid-month; praseodymium oxide was 765,000 RMB/ton, down 8.11% from mid-month; praseodymium metal was 935,000 RMB/ton, down 7.88% from mid-month; Pr-Nd alloy was 855,000 RMB/ton, down 8.06% from mid-month; and Pr-Nd oxide was 695,000 RMB/ton, down 8.55% from mid-month.

Recently, prices in the domestic light rare earth market have declined sharply; prices for core products have fallen consecutively, and overall market sentiment has shown a sustained weakening trend. The primary drivers behind this downturn are the substantial price increases witnessed in the preceding period, further dampened demand during the traditional off-season, and a marginal easing of supply—a confluence of bearish factors that has resulted in a pronounced decline in market prices over the short term.

Direct Factors: Downstream demand weakens further during the off-season, and essential demand "collapses."

With the new energy vehicle, wind power, and industrial motor sectors entering a deep off-season, operating rates at magnetic material enterprises have dropped to 55%–60%. Downstream consumers are aggressively driving down prices, forcing magnetic material manufacturers to maintain zero inventory and price their products strictly on an "as-needed" basis; they are completely refusing to accept any high-priced supplies, resulting in a precipitous decline in transaction volumes. Furthermore, manufacturers of low-to-mid-range magnetic materials are reducing their usage of praseodymium-neodymium (PrNd) while increasing the proportion of recycled materials, thereby further eroding demand for primary PrNd. With insufficient follow-through on inquiries from downstream sectors—and upstream suppliers constrained by weak demand—overall trading activity remains cautious, causing the light rare earth market to trend sharply downward.

Following excessive gains in the earlier period, the market has recently undergone a correction.

From the beginning of the year through the end of April, light rare earth prices surged significantly; however, the market has recently undergone a correction. In early May, the *Implementing Regulations of the Mineral Resources Law* officially came into effect; as the anticipated positive news materialized—thereby becoming a "buy the rumor, sell the news" event—traders and smelters moved en masse to offload inventory. Amidst a flurry of low-priced sell orders, the light rare earth market experienced a sharp decline.

Supply-side constraints have eased marginally, and spot market circulation has increased.

For 2026, mining quotas have been increased—primarily for light rare earths—while smelting utilization rates remain high at 85%–90%, leading to a continuous accumulation of market inventories. Furthermore, the resumption of ore imports from Myanmar (which feature a high proportion of light rare earths), coupled with a 63% year-on-year surge in praseodymium-neodymium oxide output by MP Materials in the U.S. during the first quarter, has helped bridge domestic supply gaps. Consequently, stockpiles previously withheld from the market due to high prices have now flooded in; this month-on-month increase in spot market circulation has disrupted the supply-demand equilibrium, driving market prices downward.

Market outlook

In the short term, the rare earth market is prone to decline rather than rise, with prices expected to remain on a downward trajectory. However, driven by growing demand in downstream sectors—such as new energy vehicles, wind power installations, and industrial motors—and bolstered by continuously tightening industry regulations, persistent expectations of strategic stockpiling, and a recovery in demand from overseas high-end manufacturing, the supply-demand balance for rare earths is poised to tighten once again. Furthermore, as rare earths serve as a core raw material for high-tech industries, and against the broader backdrop of carbon neutrality initiatives and the upgrading of high-end manufacturing capabilities, the fundamental logic underpinning long-term demand growth remains unchanged; consequently, rare earth prices are expected to exhibit a sustained upward trend over the long term.

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