China Export Tax Decision to Boost Rare Earth Demand, Lynas Says

China’s decision to scrap export quotas and taxes on rare earth elements may boost stalled demand for the products, according to Lynas Corp.

Users have been drawing down on stockpiles while awaiting clarity over China’s policy on the export of the elements, Amanda Lacaze, Chief Executive Officer of Malaysia-based Lynas, said in an interview. Rare earths are used in everything from cruise missiles to iPads.

“In the short term, a lot of what has been damping demand will be released,” Lacaze said today by phone. “Some customers have been living off inventories and they’ll come back and start placing orders.”

Lynas, one of two major producers outside China, rose as much as 30 percent in Sydney after Molycorp Inc., the largest U.S. producer, jumped 9.4 percent Thursday in New York.

China, which produces about 85 percent of global supply, will remove export tariffs on rare earths from May and in January abandoned its 15-year export quotas after the World Trade Organization ruled the policy violated trade rules.

“If China is committed to eliminating illegal processing and establishing a tax that’s simple to administer then prices will go up, and that will assist companies like Lynas and Molycorp,” said Dudley Kingsnorth, Perth-based executive director at Industrial Minerals Company of Australia Pty. “However, we are not going to see an instant response.”

Siemens, BASF

Molycorp agreed this month to supply Siemens AG with raw materials for wind-turbine generators for 10 years, while Lynas said in filings its customers include Siemens and BASF SE.

Both suppliers are poised to benefit as China moves to consolidate its rare earths sector, close down illegal mines and shutter operations that can’t meet stricter environmental standards, according to Lacaze.

Lynas, which said March was the first month in the company’s history in which it was cash flow positive, is seeking to restructure its debt before September, according to Lacaze. “Whether that’s a combination of agreements with our existing debt providers, a refinancing or otherwise,” she said.

The producer has a $225 million loan facility with Sojitz Corp. and Japan Oil, Gas and Metals National Corp., with repayments scheduled through June 2016, according to a March filing. It also has $225 million in convertible bonds due in July 2016, the filing said.

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