China cuts export quotas for rare earths

Shares of rare earth element companies reached new heights when markets reopened after the Christmas holidays on Dec. 29, 2010, following news that China had cut export quotas for the strategic metals by 35% year-on-year.
The Ministry of Commerce in Beijing has granted 14,508 tonnes of rare-earth export quotas to 32 different Chinese and foreign-owned companies in China for the first half of 2011, down from 22,282 tonnes in the corresponding six-month period of 2010.  
“They’ve made public their longer term intentions of not having any surplus material to export by 2014-2015,” Peter Cashin, president and chief executive of Quest Rare Minerals (qrm-v), said in a telephone interview. “By then we’d better have some non-Chinese rare earth production or the West’s high-tech industries are in trouble. Unless there’s development of
substitute supply, all industries
dependent on rare earth consumption will be in great difficulty in the future.”
The news sent Avalon Rare Metals (avl-t, avarf-o) surging $2.01 to $6.57 apiece at the close of markets on Dec. 29, while Rare Element Resources (res-v) climbed $4.39 to $14.76 per share. Quest Rare Minerals rose 78¢ to $5.58 per share, Tasman Metals (tsm-v) shot up $1.04 to $4.26, and Matamec Explorations (mat-v) gained 10.5¢ to 60¢ apiece.
Of the 14,508-tonne quota, Chinese-owned companies in China were granted 10,763 tonnes and foreign-owned companies in China received 3,746, according to an analysis by Gareth Hatch, a founding principal of Technology Metals Research (TMR).
The majority of quota allocations for foreign-owned companies, he adds, went to Rhodia (Baotou Rhodia Rare Earth and Liyang Rhodia Rare Earth New Materials) and Neo Material Technologies (Zibo Jiahua Advanced Material Resources and Jiangyin Jiahua Advanced Material Resources).
China has yet to unveil what export quotas will be for the second-half of 2011.
“The Chinese are keeping us guessing,” notes newsletter writer John Kaiser in his Bottom-Fish Action report. “Needless to say, this has the champions of globalization by American decree hopping mad in Washington, particularly now that China has reframed its rationale for cutting exports from trying to force technology transfer and job transfer to China to trying to cut back on environmental pollution, which has been the key to cheap rare earth prices.”
Kaiser also believes that the security of supply of critical metals will be “a prominent theme during 2011, with rare earths leading the charge.”
Hatch of TMR examined the quotas and says he believes they were allocated on a formula based on three factors. First, the tonnage of rare-earth materials exported by each company in the prior three years, as a proportion of the total exports in that period; second, the value of rare-earth materials exported by each company in the prior three years, as a proportion of the total value; and third, the tonnage of rare-earth materials exported by each company in 2009, as a proportion of the total exports in that year.
Rare earth minerals are used in a variety of high-tech industries and by many estimates China produces more than 90% of the world’s supply.