Around 90% of China’s Rare Earth Producers Operating at a Loss

Jan. 10, 2016

Some producers going out of business, others suspending production

According to an August 2015 report from the Association of China Rare Earth Industry (“ACREI”) around 90% of China’s rare earth producers are operating at a loss, causing a number to suspend production in 2015 and others to go out of business.

Supply glut continues to undermine prices

Deputy Secretary-General of ACREI, Chen Zhanheng, blames illegal mining in the nation for causing a supply glut that has persistently undermined rare earth prices. Since the ACREI report rare earth prices have continued their descent, furthering the financial woes of China’s rare earth industry – superficially that is.

Balance sheets making losses but state-owners still earning from taxes

Considering that China’s major producers are state-backed organizations, and that the state levies substantial resource taxes and value added taxes on rare earth sales, the Chinese government continues to reap major financial benefits from the rare earth industry at the expense of company balance sheets and retained earnings for common shareholders. All that said – the claim to be operating at a loss represents only the perspective of the private investor and definitely not that of the state-backed controller.

 

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