First-half financial statements for listed rare-earth companies show an industry grappling with plunging profits and flat revenue, but analysts said the sector is getting back to normal as prices and demand recover.
According to the interim reports of 32 listed rare-earth producers, total first-half earnings fell 46.6 percent to 2.9 billion yuan ($473.8 million).
Five of the companies reported a loss. Another 27 made a profit, but in each case, the number was lower than in the first half of 2012. Aggregate first-half revenue rose a mere 1.4 percent to 123.5 billion yuan.
The profit slide was caused by a plunge in rare-earth prices, industry insiders said.
Baotou Steel Rare-Earth (Group) Hi-Tech, the country's largest producer, said revenue fell 23.3 percent in the first half. Net profit declined more than 33 percent to 1.1 billion yuan.
Analysts said Baotou's shrinking profit and revenue were caused by repeated suspensions at some facilities last year.
Guangdong Rising Nonferrous Metal Group Co Ltd, Taiyuan Twin Tower Aluminum Oxide Inc and Guangdong Kaiping Chunhui Co Ltd were among those in the red.
Despite the first-half figures, analysts have forecast a recovery for the industry, with many expecting a rise in rare-earth prices and overseas demand.
Chen Jiazuo, an analyst at the China Nonferrous Metals Information Network, said the companies' results were as expected after a year-long price plunge from a peak in 2011.
"The previous high price levels and profitability couldn't be sustained," said Chen.
"The industry has been getting back to normal this year and will continue to climb back in terms of prices and export demand."
Rare earths, which comprise 17 metallic elements, are used in many high-technology products, including missile systems.
Zhang Zhong, general manager of Baosteel, said earlier at the Fifth China Baotou Rare Earth Industry Forum held in Baotou, Inner Mongolia autonomous region, that the global rare-earth supply picture will undergo "major changes" as a growing number of projects come onstream.
Zhang Anwen, deputy secretary-general of the Chinese Society of Rare Earths, said global consumption last year was just 100,000 metric tons. But rare earth projects outside China have already reached an annual production scale of nearly 70,000 tons.
He said that in the next few years, emerging production capacity outside China and technology that can replace the need for rare earths will weaken the world's dependence on China.