Antimony, tungsten and rare earths may extend rallies in China after the government banned the opening of new mines for a further year and lengthened a prohibition on exploration, according to analysts.
The extension of the ban, announced yesterday, is “bullish for prices of both the raw materials and their downstream products,” said Yan Lei, an analyst at Guoyuan Securities Co. Higher demand coupled with a “modest” increase in output may also drive prices higher, according to Dongbei Securities Co.
China, the biggest holder of rare earths, has clamped down on mining while cutting export quotas to conserve resources and protect the environment. The initiative has boosted prices and sparked concern among overseas users such as Japan about access to supplies. Rare earths, 17 chemically similar elements, are used in sonar systems, flat-screen televisions and computers.
The “government is very serious about tidying up this industry in China, rationalizing it for Chinese use,” said Nick Curtis, chairman and chief executive officer of Lynas Corp., which is building a A$550 million (($569 million) rare-earths project in Australia. “China is going to turn into a net importer of rare earths over the next four to five years,” Curtis said in an interview on Bloomberg Television today.
Higher prices will benefit companies from Hunan Nonferrous Metals Corp., China’s largest tungsten producer, to Xiamen Tungsten Co., the nation’s biggest tungsten-product maker. Shares in Hunan Nonferrous rose 10 percent last year, while Xiamen Tungsten’s have more than doubled.
China’s Ministry of Land and Resources said new-mine applications for rare earths, tungsten and antimony, which had been halted until June 30, 2011, won’t be accepted until June 30, 2012, according to a statement yesterday. Output quotas were raised, it said.
Among rare earths, prices of neodymium, lanthanum and dysprosium were at all-time highs in Shanghai yesterday, according to data from Shanghai Steelhome Information. Antimony, used in car batteries and as a flame retardant, has been at a record 112,000 yuan a metric ton since March 25 in Changjiang, Shanghai’s biggest cash market, according to data on Bloomberg.
Tungsten concentrate traded at 129,000 yuan per ton last week, according to data from industry publication Metal Bulletin. The price of the metal used in light bulbs reached a record 129,500 yuan a ton in 2005, Guoyuan Securities’s Yan said today.
China’s 2011 production limit on rare earths was set at 93,800 tons from 89,200 last year; tungsten’s was raised to 87,000 tons from 80,000; and the ceiling on antimony output was increased to 105,000 tons from 100,000, the ministry said.
‘Drive Prices Higher’
“A modest rise in production and an acceleration of downstream demand will drive prices higher,” Wang Xiahui, an analyst at Dongbei Securities, said today. “The push towards high-technology manufacturing will ensure consumption of these materials remains high.”
China accounts for more than 95 percent of rare-earth mineral production worldwide, according to the U.S. Geological Survey. The nation controls 90 percent global antimony output and about 75 percent of tungsten production, Survey data shows.
China’s demand for rare earths will exceed 110,000 tons by 2015, said Curtis at Lynas Corp., whose shares have risen more than 350 percent over the past year. “There will be a structural deficit in this market for many years to come.”
A resource tax on rare earths was boosted from today, China’s Ministry of Finance said March 24. The tax was set at 60 yuan a ton from 3 yuan on so-called mined light rare earths, and 30 yuan from 0.5 yuan on medium and heavy rare earths.