The Ministry of Industry and Information Technology (MIIT) of China’s Ministry of Natural Resources issued its first batch of 2023 rare earth mining and separation quotas, up 7% compared to H2 2022. 

The H1 2023 quota sees China Northern Rare Earths (CNRE) maintain a quota allocation for light rare earths (LREE) of around 81kt, while China Rare Earths Group (CREG), which saw a reduced allocation in H2 2022, sees its H1 2023 quota return close to H1 2022 levels at 28kt. Heavy rare earth (HREE) quota allocations are up 43% from H2 2022 but still below H1 2022, down 5% y-on-y. Annualised, the quota level would see mine output in China increase 14% year-on-year in 2023. An increase equivalent to 9% of global rare earth production in 2022.

Increases in rare earth supply are critical to meet the growing demand for magnet raw materials, neodymium-praseodymium (NdPr) and dysprosium-terbium (DyTb). CNRE’s ability to ramp up LREE output from Bayan Obo has been able to keep pace with rapid increases in NdPr demand – the main rare earths by volume in permanent magnets. Project Blue’s base case outlook, however, sees more pressure on the DyTb market balance over the medium term, and the latest quota (if annualised) relieves some of that pressure for this year.

Magnet demand is forecast to grow rapidly with electric vehicles (EVs), wind turbines and energy-saving technologies, and the mismatch in LREE and HREE market balances remains a challenge for the rare earth supply chain. A key question is where additional DyTb will be sourced to meet EV demand, with Myanmar currently accounting for the largest portion of supply outside of China.