The rare earth market, which had been sluggish for many years, has experienced a significant upturn since the second half of last year, with prices steadily climbing and nearing historical highs. This surge in prices has sparked a wave of expansion in production capacity across the industry. However, industry experts have raised concerns, warning that this rapid growth could lead to overcapacity and future price volatility. According to researchers from the Baotou Rare Earth Research Institute, the rare earth market suffered from overproduction and declining prices starting in 1998, reaching its lowest point in 2004. At that time, products like niobium oxide and antimony oxide were sold at extremely low prices—around 700,000 to 900,000 yuan per ton. Some items, such as niobium metal, were priced as low as 70,000 to 90,000 yuan per ton. However, since mid-2005, especially in recent months, the prices of most rare earth products have surged dramatically. For example, antimony oxide prices rose from around 12,000 yuan to as high as 130,000 yuan, while other similar materials climbed to about 120,000 yuan. Prices continue to rise, approaching record levels. Industry analysts believe the current boom is partly due to the gradual effectiveness of China’s macroeconomic policies aimed at curbing the disorderly exploitation of rare earth resources. These policies target issues like unregulated mining, fragmented industrial structures, and chaotic production practices. Additionally, strong demand from downstream sectors has further fueled the price increase. Despite rising prices, both domestic and international demand has grown significantly, driven by recovery in the automotive and electronics industries. Experts predict that demand for cesium and ytterbium, used in catalytic converters and permanent magnets, will remain robust into 2009. This is linked to the rapid development of NdFeB magnet technology, which has increased the demand for raw materials like yttrium oxide, lanthanum oxide, and their metallic forms, pushing up prices. In response to rising prices, many companies have expanded their production capacities. Last year, the output of ion-type rare earth minerals in China grew rapidly, with new separation plants opening in southern regions, leading to repeated construction and overcapacity. In 2005, the output of ionic rare earths reached 44,000 tons, a 14,000-ton increase from 2004. Guangdong, Jiangxi, Fujian, Guangxi, and Hunan all saw significant growth in rare earth production. By the first half of 2006, Jiangxi and Guangdong planned to add 10,000 tons of separation capacity, bringing total southern capacity to 5.5 tons, excluding smaller players. According to statistics, China's rare earth mineral output reached 118,700 tons in the past year, accounting for over 96% of global supply, a 21% increase. Smelting and separation output was 103,900 tons, up 12%, while rare earth permanent magnet production hit 35,200 tons, a 31% rise. Experts from the Inner Mongolia Rare Earth Association warned that global annual demand is around 80,000 to 90,000 tons of rare earth oxides, but China produces over 200,000 tons annually, far exceeding demand. Even with previous market downturns, Baotou's smelting and roasting capacity remains high, surpassing the national limit by nearly three times in 2006. With no new demand drivers, the supply-demand imbalance persists, and overcapacity risks causing another price crash, leading to significant losses for companies. Moreover, excessive smelting and separation capacity, combined with low industry concentration, leads to resource waste. Experts urge caution in expanding production to avoid future instability.

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