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China May Double Rare Earth Exports as Demand Rebounds

China, the biggest supplier of rare earths, may almost double exports this year and meet quotas set by the government as lower prices stimulate demand.

Chinese exports were 49 percent of the government-alloted quota in the first 11 months of last year because the slowing global economy sapped demand, the Ministry of Commerce said in a Dec. 27 statement. Overseas sales quotas may be virtually unchanged this year at 31,130 metric tons, based on Bloomberg calculations.

“Export quotas may be met this year as overseas demand recovers,” Wang Caifeng, a former official overseeing the rare- earth industry with the Ministry of Industry and Information Technology, said in an interview in Beijing. “High prices last year had deterred purchases and led to inventories’ depletion. Smuggling also hampered exports through illegal channels.”

Rare-earths prices have tumbled since the third quarter as consumers, including makers of electric cars and wind turbines, reduced use. The average price of lanthanum oxide, a rare earth used in rechargeable batteries and refining catalysts, was 129,167 yuan ($20,500) a ton in the fourth quarter, 15 percent less than in the third quarter, according to data from Shanghai Steelhome Information.

Rare-Earth Shares Fall

Molycorp Inc. (MCP), the owner of the largest rare-earth deposit outside of China, fell 3.1 percent to close at $25.99 in New York. Lynas Corp., developer of the world’s largest rare-earths refinery, fell 4.7 percent to A$1.23 in Sydney.

China produces at least 90 percent of the world’s rare earths, used in Boeing Co. (BA) helicopter blades and Toyota Motor Corp. (7203) hybrid cars. The nation has curbed output and exports of rare earths since 2009, when quotas were set at 50,145 tons, to conserve mining resources and protect the environment.

Cutting exports boosted prices and sparked concern among overseas users about access to supplies. China halted some mines last year to curb overcapacity, cut illegal mining and improve environmental standards.

The Chinese government allocated 10,546 tons of first-round export quotas to nine companies, including China Minmetals Corp. and Sinosteel Corp (SINOSZ)., that met the government’s environmental protection standards, the ministry said.

Export Licenses

Another 14,358 tons may be granted to 17 other companies, including Baotou Iron & Steel Group, China’s biggest producer, that weren’t granted an export license for this year, it said. Baotou is one of 21 smelters waiting for approval, it said.

“Baotou will be able to get the license to resume exports this year,” Wang said. “It’s just a matter of time as it takes a while for the government to review the company’s environmental improvement.”

Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., the rare-earth unit of Baotou Iron & Steel Group, has yet to receive approval to resume exports, a company spokesman, who declined to be identified because of company policy, said today by phone without providing any further details.

Baotou Steel Rare Earth gained 2.6 percent to 51.50 yuan today in Shanghai, beating a 0.4 percent gain in the benchmark Shanghai Composite Index.

China is encouraging its companies to develop rare-earth mines abroad to help ease pressure on domestic producers, Wang said. China has the technical expertise and human resources required by overseas company in mine development and processing, she said.

Buying Mines

Australia’s Lynas and Greenwood Village, Colorado-based Molycorp. should cooperate with China, including allowing Chinese groups to buy stakes in their mines, said Wang, who’s overseen the industry for more than 30 years.

Australia blocked China’s bid in 2009 to gain control of the world’s richest rare-earth deposit on concern it would threaten supply to non-Chinese buyers. State-owned China Non- Ferrous Metal Mining (Group) Co. in May 2009 offered A$252 million ($271 million) for a 51.6 percent stake in Lynas Corp. (LYC), which needed cash to resume development of the Mount Weld rare- earth mine in Western Australia.

“It was a loss to Australia, not to China.” Wang said, “They should be more open-minded.”

China’s full-year export quota for rare earths this year is expected to be about 31,130 tons, according to Bloomberg News calculations based on first-round quota figures given by the commerce ministry on Dec. 27. The quota was 30,184 tons in 2011 and 30,258 tons in 2010.

Wang is helping form a rare-earth association in China, which is expected to start in the second quarter and will be funded by industry companies, she said. The association will help the government’s planning and drafting rules for the industry, she said.

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

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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