The prices of rare earths have skyrocketed since 2010. For instance, the spot market price of europium oxide in China hit the historic high of RMB25,000/kg on June 17, 2011, with a 739% increase against the beginning of the year 2011. As China is tightening policies on rare earth production and major overseas rare earth mines have not been put into production, the global rare earth supply shortage will continue in 2011.

Currently, among key rare earth mines overseas, Mountain Pass in the United States and Mt. Weld in Australia are the only two mines with specific exploiting plans released and will officially start operation in 2012 at the earliest, with an optimistic estimated rare earth capacity of 30 thousand tons in total. As for Nechalacho, Hoidas Lake and other mines, they will be put into production after 2013.

In 2010, the actual rare earth output approximated 120 thousand tons in China, a slight decline compared to 2009. The integration of rare earth industry in the main producing areas including Inner Mongolia and Jiangxi province has been accelerated. For instance, rare earth resources in Inner Mongolia will be monopolized by Inner Mongolia Baotou Steel Rare-earth (Group) High-Tech; major rare earth mines in Ganzhou (Jiangxi province) have stopped production for consolidation. It is expected that the disordered situation of rare earth production in China will be significantly improved in 2011. In the next few years, the output of rare earths will remain steady with a slight decline in China.

In 2010, being affected by the continued price increase of rare earth products, the operating performance of major enterprises in the upstream industry of rare earths was significantly improved, and their operating incomes soared vigorously. Take Inner Mongolia Baotou Steel Rare-earth for instance, in 2010, its REO output only raised 8.3% YoY, whereas, the operating income and net income sharply increased by 102.8% and 1241.1% YoY respectively.

The skyrocketing prices of rare earth materials have put costs pressure on the downstream rare earth deep processing enterprises in China. Downstream industries such as rare earth permanent magnet materials and rare earth luminescent materials are faced with product restructuring. In the meantime, industry investment has switched to high value-added product projects. For instance, in 2011, Beijing Zhong Ke San Huan High-Tech Co., Ltd., the largest producer of rare earth permanent magnet materials in China, aimed all its fund-raising projects at the application fields of high-end NdFeB rare earth permanent magnet materials, including new energy vehicles, energy-efficient home appliances, and wind power.