China's rare earth exports slide, but still exceed quota

Australian
21 January 2011, Page: 22

CHINESE statistics showed a 03% slide in the country's rare earth metal exports last year, but also showed that overseas sales were a third higher than stipulated in the government's own quota allocation. China's export of rare earth ore, metals and compounds slipped to 39,813 tonnes last year, according to figures published by the quasi-official China Customs Statistics Information Centre in Hong Kong.

The figures underscored Beijing's tight grip on the specialised metals but also showed how the trade was sustained at levels well above a Commerce Ministry quota that was designed to slash exports by 40% last year to 27,449 tonnes. Pockets of global industry closely monitor China's policy on rare earths because more than 95% of world supply emerges from the nation's mines and processing centres.

The 17 chemically similar elements have unique properties that have paved the way for miniaturised electronics such as the iPhone and specialised magnets used in wind turbines, as well as advances in petroleum refining and glassmaking. Reflecting how fears of tightening supply sent global rare earth prices soaring last year, China's exports of the elements tripled in value, the data shows.

Just the same, even at the higher levels, the overseas market was worth only SUS939.72 million last year, about what China made exporting leather gloves. China's quotas, which have been tightened several years in a row but especially last year, have discomfited governments fearful that Beijing could use industry dominance as a trade weapon.

A US Department of Energy study recently warned of short term supply disruptions for elements such as dysprosium and neodymium needed to make wind turbines and electric cars. The Washington trade group Alliance for American Manufacturing is among those pressing US President Barack Obama to seek supply assurances from Chinese President Hu Jintao in their meetings this week.

But the fears have also sparked a rush of investment into rare earth miners such as Colorado based Molycorp that are seeking to challenge China's dominance. Toyota, a user of rare earths for its Prius vehicles, caused a stir last week when it revealed plans to develop an efficient engine that did not need the elements.

Beijing says its quotas, which are slated to reduce exports 35% for the first half of this year, are part of a strategy to restructure the heavily polluting rare earth industry, to conserve its reserves of about a third of the world total and combat widespread smuggling in the elements.

Traders in China say they have faced long delays in getting product through the country's ports. "China has taken significant steps in recent months to ensure its customs officers are well aware of what the quotas are", said Dudley Kingsnorth, a Perth-based analyst from Industrial Minerals Company. Mr Kingsnorth said he expected China to be tougher in enforcing quotas this year.

He said various factors could explain a mismatch between 2010 exports and the quota levels, including delays in booking sales in customs registries and how the tonnage of rare earth elements was measured by trade officials. Figures from Japan, the largest importer of rare earths, have also suggested China exported more rare earth last year than stipulated by its quotas.

According to the Finance Ministry in Tokyo, Japan imports in some cases soared. Japan's imports of lanthanum oxide, an important ingredient for making hybrid car batteries, more than tripled in the first 11 months of 2010 from the same period the previous year.