Lynas Says Reductions to China's Rare Earths Export Quota May Be Permanent
Lynas Corp., building a A$550 million ($517 million) rare earths mine in Australia, said China’s export quotas cuts for the minerals used in hybrid cars and iPods may be permanent as domestic demand gains.
“It would not surprise me if China turned into a net importer of rare earths over the next five to 10 years because more and more technology is emerging from China” that uses rare earths, Nicholas Curtis, executive chairman of the Sydney-based company, said today in an interview. “They’ve cracked down heavily on the illegal mining, on the environmental damage, on the illegal smuggling of rare earths and putting order back into an industry that was chaotic in China.”
China, which controls more than 90 percent of the rare earths market, in July cut export quotas for this half by 72 percent to bolster prices and ensure domestic supplies of the minerals, also used in liquid crystal displays and wind turbines. Lynas expects demand growth for magnets, which make up about 28 percent of rare earths use, to rise 12 percent annually to 2014.
“Demand is inelastic to price because you can’t substitute the rare earths for that application,” said Curtis. “You can’t have an LCD screen without rare earths.”
Lynas has more than doubled this half and rose 3 percent to A$1.37 at the 4:10 p.m. close of trading on the Australian stock exchange.
Aggregate prices for rare earths have risen to $51 a kilogram, from about $15 a kilogram in April, according to Lynas. Rare earths are a group of chemically similar metallic elements, including lanthanum, cerium, neodymium and europium.
U.S. Concern
The U.S. in July asked business groups and unions to provide evidence that China is hoarding rare earths for a potential trade case that may be filed at the World Trade Organization, according to industry representatives who asked not to be identified. Japanese officials raised concern about the lower quotas during a visit to China last month.
Lynas plans to bring its Mount Weld project in Western Australia and processing plant in Malaysia into production by the third quarter next year. The refinery will be “the first outside of China in about 50 years,” Curtis said.
The industry will be in a supply deficit “for the next five to 10 years,” he said. “We have grossly underestimated the available supply from China versus the demand.”
China Non-Ferrous Metal Mining (Group) Co. dropped a proposal to buy a majority stake in Lynas after Australia’s Foreign Investment Review Board blocked the deal last September. Lynas hasn’t received any inquiries regarding a takeover or a stake sale since then, Curtis said.
To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net
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