Companies face shortfalls on logistics, labor fronts
China’s rare-earth industry has gone into dormant mode following the outbreak of novel coronavirus pneumonia (NCP), and industry insiders said if production did not resume within a month, exports to the US, Japan and Europe would be affected, along with the global supply chain.
A manager of a large state-owned magnet producer based in Ganzhou, East China’s Jiangxi Province, surnamed Yang told the Global Times on Wednesday that most upstream and downstream rare-earth companies in the city have not restarted work yet, partly due to the lack of local labor resources. Others are waiting for government approval.
“There are few local labor sources, and returning workers from other parts of China are still being quarantined for seven to 14 days. It’s also very difficult to source materials in and send products out because of logistics problems,” Yang complained.
Ganzhou is a major base for China’s rare-earth sector, and about 70 percent of the world’s medium to heavy rare earths are produced in the city.
To contain the spread of the NCP, the local government delayed business reopening to Monday, and companies need to make full preparations involving medical supplies such as face masks and disinfectants in order to apply for resumption.
Zhao Chao, manager of a small rare-earth extraction company, told the Global Times that only about 20 percent of local rare-earth companies have recommenced work, while most of the others are still making preparations, including his firm.
Yu Xi, general manager of Ganzhou Fortune Electronic Co, which makes rare-earth permanent magnets, said the company is preparing protective supplies such as face masks so that it can submit documents for work resumption to the local government.
“We have not decided on the date to restart work and will set the date based on how the NCP is being controlled,” Yu said.
Rare-earth manufacturing is a labor-intensive industry so it’s reasonable that companies take a very cautious attitude, Zhao said, noting that the fallout of any delay on rare-earth exports so far is limited because the company built up inventories before the Spring Festival holidays.
Chen Zhanheng, an analyst at the Association of China Rare Earth Industry, noted that low prices tend to make downstream companies stock up on rare earths.
“Although rare-earth supply is being disrupted, the ongoing delay in transportation and the end-use product market will eventually mitigate the overall impact on the whole industry chain,” Chen said, noting that it will not matter too much.
However, Yang said that if production did not resume within a month, it would affect rare-earth exports to the US, Japan and Europe and weigh on global supply chains. Local suppliers will run out of stockpiles, and their output will fail to catch up with foreign demand.
“If we can reopen within half a month and the delivery network also resumes by that time, the impact will be temporary and limited,” Yang said.
Investors appear to be taking a positive view. Most A-share listed rare-earth companies closed higher on Wednesday. China Northern Rare Earth High-Tech Co closed 2.93 percent higher at 9.83 yuan ($1.41) after it reported partially resumed production, and Rising Nonferrous Metals Co rose 2.98 percent to 30.75 yuan.
A worker unloads rare earths along the Yangtze River’s banks in Southwest China’s Chongqing Municipality on May 9. Photo: IC
