Bloomberg News

China 2012 Rare-Earth Export Quota Unchanged as Sales Slump

December 29, 2011

(Adds analyst’s comments in fourth paragraph.)

Dec. 28 (Bloomberg) -- China, the biggest supplier of rare earths, will keep 2012 overseas sales quotas virtually unchanged after exporters used only half the amount allotted for this year as buyers sought to cut usage and amid complaints over restrictions from trading partners.

The full-year quota may be about 31,130 metric tons, according to Bloomberg News calculations based on first-round quota figures given by the ministry in a statement yesterday. The quota was 30,184 tons in 2011 and 30,258 tons in 2010. China supplies more than 90 percent of the global market.

Prices of rare earths, used in Boeing Co. helicopter blades and Toyota Motor Corp. hybrid cars, have tumbled 46 percent from the third quarter as makers of electric cars and wind turbines sought to reduce use of the metals and slow global economic growth sapped demand. China has curbed output and exports since 2009, when quotas were set at 50,145 tons, to conserve resources and protect the environment.

“After slashing sharply in 2010, China may not be able to cut further because of trade issues with other countries,” said Kim Gyung Jung, an analyst at Eugene Investment & Securities Co. in Seoul. “The 2012 quota will lend support for the prices of some rare earths which are heavily dependent on China’s supplies.”

China has also set export limits on a range of mining products including silver, minor metals and coke to conserve resources and protect the environment.

‘Under Pressure’

“China is under pressure from the international community in controlling rare earth exports, and a further cut of quota could fuel more complaints,” Peng Bo, an analyst at Guosen Securities Co., said by phone from Shenzhen. Still, “the government really doesn’t want to export the minerals too much as Chinese development also needs it.”

Complaints against China by the U.S., the European Union and Mexico were bolstered by a World Trade Organization ruling, which found in July that quotas, export duties and license requirements on industrial ingredients such as coke, zinc and bauxite violate global rules.

China, the world’s fastest growing major economy, exported only 14,750 tons of rare earths in the first 11 months of this year, or 49 percent of the full-year limit, “leaving a huge amount of export quota unutilized,” the ministry said.

“The quota has become pointless if export demand falls short of the limits,” said Wei Chishan, a Shanghai-based analyst at SMM Information & Technology Co., a data provider. “Rare-earth users are under great pressure to pass on surging costs, while the global slowdown has slashed demand.”

‘Supply Sufficient’

“It shows supply is sufficient,” SMM’s Wei said.

Shares in Lynas Corp., an Australian rare earths developer, dropped 3.4 percent to A$1.125 at 12:54 p.m. Shanghai time. The Bloomberg Rare Earth Mineral Resources Index dropped 54 percent this year, led by a 90 percent decline in Perth-based Navigator Resources Ltd.

The Chinese government allocated 10,546 tons of first-round export quotas to nine companies, including China Minmetals Corp. and Sinosteel Corp., that have met the government’s environment protection standards, the ministry said. Another 14,358 tons may be granted to 17 other companies, including Baotou Iron & Steel Group, China’s biggest producer, if they meet the standards by the end of July, the statement said.

The first-round quotas will account for about 80 percent of the full-year volume for 2012, the ministry said.

Rare earths are 17 chemically similar elements including neodymium, cerium and lanthanum. The export prices from China for eight rare earths found at the Mount Weld project in Western Australia surged to $193.21 a kilogram on average in the third quarter, compared with $31.35 in 2010, according to figures on Lynas Corp.’s website. The price has since fallen to $103.76 a kilogram today, the company said.

Prices should stabilize next year after soaring in the first half of this year, and then collapsing, Guosen Securities’ Peng said. “As economic growth slows down, the market will become more rational.”

--Helen Yuan, with assistance from Helen Sun in Shanghai, Feiwen Rong and Penny Peng in Beijing and Jae Hur in Tokyo. Editors: Richard Dobson, Madelene Pearson

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net


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