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Thread: China Pledges Rare Earth Supplies, Signals Exports May Rebound

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    China Pledges Rare Earth Supplies, Signals Exports May Rebound

    China Pledges Rare Earth Supplies, Signals Exports May Rebound
    By Bloomberg News - Oct 20, 2010 10:07 PM GMT+1300
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    Samples of various rare earth compounds are displayed in the showroom at Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. in Baotou, Inner Mongolia, China. Photographer: Nelson Ching/Bloomberg

    China pledged to maintain supplies of rare earths and signaled exports of the ingredients used in electronics, wind turbines and smart bombs may rise next year.

    The Commerce Ministry denied reports in the New York Times and China Daily that the government plans further export cuts and has extended an embargo of Japan to include the U.S. and Europe. “China will continue to supply rare earth to the world,” the ministry said in a faxed response today.

    “China might raise the production cap and export quota slightly next year,” said Wang Caifeng, until last week the deputy director at the Ministry of Industry and Information Technology who oversaw the sector, adding that it was her personal opinion. She is now in charge of setting up the ministry-affiliated China Rare Earth Industry Association.

    More than 90 percent of the rare earth produced worldwide is mined in China, which cut its second-half export quota by 72 percent this year, spurring a trade dispute with the U.S. and raising tensions with Japan. The Chinese government said it aims to shut polluting and loss-making mines and ensure it can meet domestic demand as the nation tries to stem environmental damage and develop more value-added industries.

    “To protect exhaustible resources and ensure sustainable development, China will continue to implement restrictions on the mining, production and export of rare earth,” the Commerce Ministry said.

    Growing Competition

    Communist Party leaders meeting in Beijing this week outlined plans to build a fairer society through investing in technology industries such as alternative energy, and by conserving natural resources and tackling pollution. That’s likely to increase competition with developed economies such as the U.S. and Japan for resources needed to fuel this growth.

    China invested $34.5 billion in low-carbon energy technologies last year, according to Bloomberg New Energy Finance. The U.S. spent $18.6 billion.

    The U.S. is considering making a case at the World Trade Organization over China’s aid to its clean-energy producers, acting on a complaint from the United Steelworkers union that says the assistance violates global trade rules.

    “There’s no need to politicize the issue” of rare earth exports, Wang said. “It’s also a bit hypocritical for the developed countries to ask China to reduce carbon emissions and reduce energy consumption, while criticizing China’s move to consolidate the rare earth industry to preserve its own environment.”

    Cutting Capacity

    China has already cut the number of rare earth companies this year, said Li Zhong, deputy general manager of Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co.

    “There used to be many smaller miners and producers, but this year, after China tightened production rules, all of them were forced out of business,” he said at a conference on the minerals in the northeastern Chinese city of Xiamen today. “We are the sole producer now in” Inner Mongolia.

    By 2015 the government wants to reduce the number of rare earth oxide producers from 90 to 20, he said.

    China set the production cap at 89,200 metric tons this year, while slashing its export quota to 22,300 tons, according to estimates by Guosen. “The reduction of output and exports this year was to prevent raw materials being sold too quickly and too cheaply,” Pengsaid by phone from Shenzhen today, adding that rising prices may lead to higher exports.

    Getting Rarer

    Domestic rare earths deposits dropped to 27 million metric tons by the end of 2009, or 30 percent of total known global reserves, from 43 million tons, or 43 percent of the world total, in 1996, Chao Ning, section chief of foreign trade at the Commerce Ministry said on Oct. 16 at a Beijing conference.

    China hasn’t resumed exporting rare earth minerals to Japan after shipments were curtailed last month during a territorial dispute, Chief Cabinet Secretary Yoshito Sengoku said today in Tokyo. “The situation with regard to Japan hasn’t changed.”

    Japanese officials said supplies were cut after a Chinese fishing trawler collided with two Coast Guard boats in the East China Sea near islands claimed by both countries. Restrictions disproportionately affect Japan because it accounts for 65 percent of Chinese rare earth metal exports, according to a Sept. 24 report by Macquarie Group Ltd.

    “We’re focusing on the domestic market and we haven’t been trying to get government export licenses lately,” John Jiang, a sales manager in charge of exports at Hong Kong-listed China Rare Earth Holdings Ltd., said today. The company exports 30 percent of its products to Japan, Jiang said in an interview on Sept. 28. He declined to comment today.

    Plan B

    The Japanese government has set aside $150 million to help find alternatives to rare earths and source supplies from other countries, Shigeo Nakamura, president of Advanced Material Corp., said at today’s conference.

    Toyota Tsusho Corp., a trading company affiliated with Toyota Motor Corp., has formed a joint venture with Sojitz Corp. and a Vietnamese state-run mining company to export the metals to Japan from 2012, spokesman Katsutoshi Yokoi said. The company acquired Tokyo-based rare earth metal importer Wako Bussan Co. in December 2008, which will import from India from next year.

    Showa Denko K.K., the world’s second biggest hard-disk maker, opened a rare earth plant in Vietnam in May this year.

    “Most well-run companies have stocks of materials and they are not going to be impacted in the short term,” said Dudley Kingsnorth, chief executive officer of Perth-based Industrial Minerals Co. of Australia. “In the longer term, there are a number of projects coming through.”

    Sydney-based Lynas Corp. is building a A$550 million ($532 million) rare earth minerals project in Australia.

    A rare-earth mine in the U.S., in Mountain Pass, California, shut down most operations in 2002. Molycorp Inc., which owns the mine, plans to reopen it this year, the company said in a June prospectus.

    --Feiwen Rong, Xiao Yu, Yidi Zhao in Beijing. Editors: Ben Richardson.

    To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at +86-10-6649-7563 or frong2@bloomberg.net
    In the realm of spirit, seek clarity; in the material world, seek utility

    Gottfried Leibniz

  2. #2
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    this is where I come in.................. it drops 3.5% this morning after hitting 52week high.

    Molycorp, Inc. is a rare earth oxide (REO) producer in the Western hemisphere and own most fully developed rare earth project outside of China.



    Molycorp, Inc. Reaches 52-Week High; MCP, BHP, NRP

    October 20, 2010 03:26

    Molycorp, Inc. (MCP) [Chart - Analysis - News] established a new 52-week high yesterday at $31.89. Clearly investors are enthusiastic about the firm's prospects. The rally was accompanied by higher than average volume, which adds to the momentum behind yesterday's move.








    The question is, can MCP continue moving higher? The stock has gained 49.74% during the past month, has a price-to-book value of 29.28 and a PEG ratio of 0.

    Studies have shown that investors who buy stocks after hitting yearly highs during a bull market achieve higher average returns that the broad market indexes. This is a great example of the trader adage that "the trend is your friend." However, these historical results are based on large averages---and some bullish momentum in the market. It is much more difficult to say whether MCP, as a single stock, will continue to hit new highs. But for the time being, things look promising.

    MCP competes in the Industrial Metals & Minerals industry with BHP Billiton Ltd. (BHP) [Chart - Analysis - News]---the largest firm in the industry group---and Natural Resource Partners LP (NRP) [Chart - Analysis - News], who have returned 6.49% and 3.41% during the past month, respectively. MCP is likely to be sensitive to its competitors so future weakness in the Industrial Metals & Minerals industry could be an early warning sign that things might be turning around.
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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    if one can't make money out of the stupid mistake the Chinese government makes................then one is just too stupid.
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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